Chief Executive Officer of Customs v Abdul Wahid Afiouny & Anor

[2006] NSWSC 430

CITATION:	Chief Executive Officer of Customs v Abdul Wahid Afiouny & Anor [2006] NSWSC 430
HEARING DATE(S):	13/03/06, 14/03/06, 15/03/06, 16/06/06
JUDGMENT DATE :	14 July 2006
JUDGMENT OF:	Buddin J
DECISION:	Judgment entered on 21 April 2005 be set aside. Costs of the Motion be costs in the cause.
CATCHWORDS:	Customs Act prosecutions - defendants did not appear at hearing - judgment entered - application to set judgment aside - whether the defendants have an arguable case - whether the defendants have a reasonable explanation for not attending hearing
LEGISLATION CITED:	Customs Act 1901 Supreme Court Rules Uniform Civil Procedure Rules
CASES CITED:	Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 Magnate Projects Pty Ltd v Youma Constructions (No2) Pty Ltd [2005] NSWCA 331
PARTIES:	Chief Executive Officer of Customs (Plaintiff/Respondent) Abdul Wahid Afiouny (First Defendant/Applicant) Bilal Afiouny (Second Defendant/Applicant)
FILE NUMBER(S):	SC 20077/2002
COUNSEL:	P Roberts SC/I Bourke (Plaintiff/Respondent) G Thomas (Defendants/Applicants)
SOLICITORS:	Australian Government Solicitor (Plaintiff/Respondent) Vosnakis & Associates (Defendants/Applicants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

BUDDIN J

FRIDAY 14 JULY 2006

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

JUDGMENT

Introduction

1 HIS HONOUR: By Notice of Motion dated 26 July 2005 Abdul Walid Afiouny and Bilal Afiouny (whom I shall refer to as the first and second defendants, respectively) seek orders pursuant to Part 40 Rule 9 of the Supreme Court Rules that judgment obtained by the Chief Executive Officer of Customs (the plaintiff), which was entered against them on 21 April 2005, be set aside. By reason of those orders the defendants were required to pay in excess of $4.5 million to the plaintiffs.

2 It is common ground however that the Uniform Civil Procedure Rules apply to the proceedings initiated by the Notice of Motion and that the provision which ought to have been invoked is Part 36 Rule 16(2)(b) of those Rules. That provision empowers the court to set aside or vary a judgment or order after it has been entered if it was “given or made in the absence of a party”.

3 It is also common ground that the relevant test to be applied was enunciated by Hodgson JA (with whom Campbell AJA agreed) in Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331. His Honour said:

In my opinion, the following passage from the judgment of Jordan CJ in Vacuum Oil Pty. Co. Limited v. Stockdale (1942) 42 SR(NSW) 239 at 243 sets out the principles applicable to this case:
The present is not a case in which judgment was signed by default through some procedural omission on the part of the defendant or his legal advisers. The action followed the ordinary course, except that its coming on for trial was delayed through dilatoriness on the part of the defendant. It is one in which, the action coming on for trial in its ordinary place in the list, no one was present in Court to conduct it for the defendant, and it therefore proceeded in his absence. In such a case, when the plaintiff is in no respect in default, a new trial will not be granted save in very special circumstances: Chitty's Archbold, 10th ed., 1457; 12th ed., 1526. In every such case the Court has an inherent and unfettered, though judicial, discretion, in the exercise of which it will, however, necessarily consider (a) whether any useful purpose would be served by setting aside the judgment, and (b) how it came about that the applicant found himself bound by a judgment regularly obtained: Evans v. Bartlam [1937]AC 473 at 482 . As a general rule (although not necessarily in every case, if some reason exists for departing from it: Collins' Book Depot Pty Ltd. v. Bretherton [1938] VLR 49; Austn. Digest (1934-1939) 1859, the Court requires an affidavit showing prima facie that the defendant has a good defence on the merits: Evans v. Bartlam [1937] AC 473 at 480, 488-9, and also an explanation of his absence which shows that justice requires that in the circumstances it should be excused. And if there has been gross negligence on the defendant's part, the Court will be the more disposed to require at least a reasonably clear case of merits to be shown, to incline it to interfere: Nash v. Swinburne 3 M&G 630 at 632; Weitzel v. Friedenreich 14 WN 7; Austn. Digest 376 .


I do not read the cases of Taylor v. Taylor (1979) 143 CLR 1 and Allesch v. Maunz (2000) 203 CLR 172 as materially affecting the principles stated by Jordan CJ in Vacuum Oil .

In Taylor , orders were made in the absence of a party because of neglect of his solicitor, and this party applied to have it set aside, having “filed affidavit material which showed that the facts of the case were seriously in contest” (143 CLR at 8-9); and the various statements made by the judges of the High Court in that case have to be read in the light of that circumstance. Similarly, in Allesch , the party seeking to set aside a property settlement order made in his absence filed an affidavit that made claims “as to the value and extent of the property owned by him and his former wife and as to his reduced earning capacity” (203 CLR at 176), which was accepted by the primary judge in that case to be such that, if it was accepted even in part, “the result of [the wife’s property settlement] application may well be substantially different” (203 CLR at 177).

In Allesch , it was stated in the joint judgment of Gaudron, McHugh, Gummow and Hayne JJ (at 182-3, after reference to Taylor ) that “a court will, ordinarily, be satisfied that there has been a miscarriage of justice if a person has suffered an adverse order in circumstances where his or her failure to appear is adequately explained unless it also appears that no different result would be reached on a rehearing or that a rehearing would work an irremediable injustice to the other side”. Having regard to the circumstances of that case and of Taylor , I do not read that sentence as intended, by implication, to do away with the long-established requirement that a person applying to set aside an order, regularly made in his or her absence, ordinarily bears an onus of showing an arguable case on the merits, that is, a case that might reasonably bring about a different result, as well as an explanation for his or her absence: cf. Allesch at 188-9 per Kirby J.
In my opinion, an applicant seeking to set aside a judgment obtained after an undefended hearing does not have to show that a different result is likely should the judgment be set aside and a new trial ordered. However, the circumstances may be such, as Jordan CJ says, as to require “a reasonably clear case of merits to be shown”; that is, that it appear reasonably clearly that there is a defence capable of producing a different result. If that defence depends on facts, then there should be some evidence of those facts; and the circumstances may be relevant to the quality of the evidence that is required to show a defence on the merits in particular cases. Among such circumstances could be the degree of the applicant’s default, and hardship to the respondent. (pars 48-52)

4 The court has a discretion as to whether it will grant the relief sought. In exercising that discretion the court has to balance the competing interests of the parties as well as consider the overall interests of justice. In essence, the defendants (who are the applicants in these proceedings) need to demonstrate that they have both an arguable case on the merits and a satisfactory explanation for their failure to attend the hearing. It may be that a delay in taking steps to have a judgment set aside, where it operates to the prejudice of the opposing party, may also be a relevant consideration. That is not a factor however which has any significance in the present case, particularly as these proceedings were instituted very shortly after the defendants retained new solicitors to act on their behalf. Moreover the plaintiff does not point to any respect in which it has been prejudiced or suffered an “irremediable injustice”.

History of the proceedings

5 On 5 March 2002 the plaintiff filed a Statement of Claim seeking that various orders be made against the two defendants. In essence the plaintiff sought that each of the defendants be convicted of specified offences under the Customs Act arising from the alleged smuggling of large quantities of cigarettes into Australia, and of attempting to evade the payment of duty in respect of those items. It was also alleged that the defendants had made false or misleading statements by failing to declare the cigarettes. As a consequence, the plaintiff also sought the recovery of substantial monetary penalties against each defendant. In due course an Amended Statement of Claim was filed but for present purposes nothing turns upon that fact.

6 The plaintiff alleges that on or about 3 April 2001 the first defendant smuggled 199 cartons of cigarettes into Australia (“the first consignment”). The cigarettes were concealed in a container which also contained 568 cartons of mineral water. It was on a vessel which arrived in Australia from Indonesia. The plaintiff alleges that the first defendant organised the shipment from Indonesia and arranged for customs brokers to clear the container through Customs in Australia.

7 The plaintiff also alleges that on or about 17 April 2001 the second defendant smuggled 345 cartons of cigarettes into Australia (“the second consignment”). On this occasion the cigarettes were concealed in two separate containers on board a second vessel which had also arrived in Australia from Indonesia. On this occasion the cigarettes were allegedly concealed amongst cartons of mineral water, biscuits, soap and chewing gum. The same customs brokers were retained. The first defendant was charged with “directly or indirectly” concerning himself in the offence alleged against the second defendant. The plaintiff alleges that the defendants took steps to have these two containers returned to Indonesia but only after they became aware of the plaintiff’s discovery of the contents of the first consignment.

8 On 4 June 2002 the solicitors then acting for the defendants, Perla & Jordan, filed defences on behalf of each of the defendants. In broad terms, that material amounts to a general denial of the allegations made against them.

9 On 26 November 2002 the plaintiff filed a Notice of Motion seeking summary judgment against the defendants. A brief of evidence was also served upon the defendants at the same time.

10 On 3 December 2002 the defendants’ solicitor filed a Notice of Motion seeking, inter alia, an order that the Statement of Claim be struck out as an abuse of process. Amended Defences dated 31 January 2003 were filed on behalf of each of the defendants. On this occasion, each of the defendants repudiated in rather more specific terms the allegations which had been brought against them. The filing of the Amended Defences may explain why the plaintiff’s Notice of Motion of 26 November 2002 was not ultimately pressed.

11 The defendants’ Notice of Motion of 3 December 2002 was not heard until 9 February 2004 as the parties were waiting for the decision of the High Court in Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 to be handed down.

12 The defendants were represented at the hearing of that Motion by Mr Glissan QC and Mr Manion of counsel. On 25 February 2004 McDougall J dismissed the Notice of Motion. A Holding Summons for Leave to Appeal against his Honour’s decision was filed but it appears that it was not proceeded with.

13 On 25 June 2004 the proceedings were listed for a status conference. There was however no appearance on behalf of the defendants at that conference.

14 On 13 August 2004 the matter was listed for a two week hearing to commence on 29 March 2005.

15 On 24 December 2004 a Statement of Liquidated Claim was issued by the Local Court in respect of a claim by the defendants’ solicitors for payment of a sum of just over $57,000 for what were alleged to be outstanding counsel’s fees together with interest and costs.

16 On 5 January 2005 a letter was sent by Perla & Jordan to the defendants enclosing a Notice of Intention to Cease Acting as a Solicitor on their behalf. (It was not however until 9 October 2005 that a Notice of Ceasing to Act was filed with the Court).

17 On 2 February 2005 Perla & Jordan notified the plaintiff’s solicitors (the Australian Government Solicitor) by facsimile that they were no longer acting for the defendants. As a consequence Ms Brady, a solicitor acting for the plaintiff, wrote to each of the defendants advising that she had been informed by Perla & Jordan that they were no longer acting for them. Ms Brady asked the defendants to let her know who would be acting for them at the hearing.

18 Ms Brady followed up her letter with three phone calls to the second defendant. In an affidavit sworn 24 March 2005 she deposes to the contents of those conversations. What follows is extracted from her affidavit:

I then telephoned the second defendant, Mr Bilal Afiouny. After introducing myself, I said “the hearing is on 29 March. Your solicitors wrote to me and said that they are no longer acting for you or your father.”
He said “I am not sure what’s going on. I just got back from overseas yesterday. My lawyers wrote to me two or three times. He is doing my case then all of a sudden he is not. He sent me an invoice for $54,000 or something like that. Why didn’t he send me invoices along the way? I can’t pay that much”.
I said “The hearing is on 29 March”.
He said “We have been waiting for three and a half years. It’s been dragging on. I only got back yesterday, but I am going to see my lawyer.”
I said “Could you please get back to me or get your solicitor to contact me.” I gave him my name and number.
On 23 February I telephoned the second defendant. I said “do you have legal representation. He said “I am going to see my solicitor. I will ring you next Wednesday.”
On 9 March 2005 I telephoned the second defendant and said “Do you have new solicitors so that I can contact them rather than speaking to you.” He said “I will call you back tomorrow”. I said “do you have my number”. He said “yes”.
I have not heard from either of the defendants as to whether they have retained Perla & Jordan, Lawyers or engaged new solicitors.

19 On 18 March 2005 Ms Brady wrote a letter to the defendants to which were attached various documents including a copy of the Amended Statement of Claim.

20 On 29 March 2005 the matter was called on for hearing before Newman AJ. There was no appearance by either defendant or by any legal representative on their behalf. After the affidavit of Ms Brady, to which I have just referred, was read, the matter then proceeded in their absence. The plaintiff adduced some short oral evidence and tendered a number of exhibits in order to establish its case.

21 On 30 March 2005 Newman AJ made various orders. His Honour convicted the first defendant of two offences of smuggling cigarettes and the second defendant of one such offence. A pecuniary penalty order in the sum of $2,757,893 together with costs of $80,000 was made in respect of the first defendant. A pecuniary penalty order in the sum of $1,747,425 together with costs of $40,000 was made in respect of the second defendant. Judgment was entered on 21 April 2005.

22 In consequence of the orders made by his Honour the plaintiff did not seek convictions in respect of the offences alleging evasion of duty and the making of false statements.

23 A Notice of Appeal without Appointment was filed on behalf of the defendants by Perla & Jordan. In an accompanying affidavit Ms Perla described herself as being “the solicitor for the 1st and 2nd appellants for the purpose of filing the Notice of Appeal only”.

24 On 19 May 2005 Ms Perla wrote to the defendants confirming that they had agreed in conference with Mr Manion to thereafter brief counsel on a “direct access basis” because her firm was “winding-up”.

The evidence of the defendants

25 It is against that background that the evidence of the defendants falls to be considered. The second defendant swore an affidavit on 25 July 2005. In it he said that his father (the first defendant) was the proprietor of a family business which had for many years been engaged in the business of importing food products from Asia, Europe and the Middle East. He said that at some stage he became involved in the business, taking on a role as manager.

26 He said that following the commencement of proceedings against them, the defendants retained the firm Perla & Jordan to act on their behalf. They did so following a recommendation from Sam Hassan, who was married to the first defendant’s daughter Laura, that a person named Akram Obeidat, who worked with the firm, would look after their interests. Correspondence from the Law Society establishes that the firm Perla and Jordan is, or more accurately was, a multi-disciplinary partnership. Mr Obeidat was a non-legal partner in the firm. He is not admitted and does not hold a practising certificate in NSW.

27 Each of the defendants maintained that they understood that Mr Obeidat was a solicitor and that they would not have retained his services had they known that he was not a solicitor.

28 The first defendant and Laura first met Mr Obeidat in about March 2002. The second defendant met him the following month. Although the family had previously engaged solicitors to act on their behalf in respect of matters arising from the family business, the second defendant said that they had never previously had any experience of court matters. It would appear that at least for the first few years, the defendants had contact only with Mr Obeidat, with whom they were able to converse in Arabic. Moreover, Laura played a prominent role in those early communications. Indeed, a letter dated 6 June 2002, enclosing an Interim Memorandum of Fees in the sum of $1760, was directed to her. That memorandum also indicated that contact (usually by telephone) was frequently made with her alone.

29 At an early stage the defendants were informed that the estimated cost of the proceedings was likely to be in the vicinity of $150,000 - $200,000. The second defendant said that it was only in early 2005 that he spoke to Ms Perla for the first time. He said that those conversations related to demands made by her for outstanding fees.

30 The second defendant said that he placed his trust in Mr Obeidat to act in the best interests of both himself and his father, especially as he was only about 20 years of age when the proceedings commenced. He said that on Mr Obeidat’s advice, he and his father retained both senior and junior counsel to act for them.

31 I interpolate to observe that Ms Perla gave evidence that she had concerns herself as to whether the firm had the expertise to handle a case of such significance. Indeed, she gave evidence that the matter was effectively conducted at all stages under the guidance of counsel. Counsel, for example, drafted all court documents. Ms Perla indicated that the day-to-day management of the matter and contact with the clients rested with Mr Obeidat, although it appears that on occasions Ms Perla attended at call-overs.

32 The second defendant said that in early 2004 he had a conversation to the following effect with Mr Obeidat:

The case is going good. They have nothing on your father Abdul and he should get off easy. We have to focus on you Bill because they are trying to get you. I suggest we drag the case out as long as we can because it will cost them too much and they will more than likely just drop the case.

33 The second defendant gave evidence that he did not want to delay the case but that he accepted the legal advice that it was in his interests to do so. He also gave evidence that he was not really kept aware of the progress of the matter. He did not, for example, know about the Notice of Motion to strike out the plaintiff’s Statement of Claim. He also stated that he was unfamiliar with court procedures. In cross-examination, for example, he said that he thought he may go to gaol if convicted of the offences. The second defendant also said that he did not attend court at any stage of the proceedings.

34 The second defendant gave evidence that in late 2004 he received a phone call from his sister Laura, who informed him that she had been informed by “the lawyer” that there “are some bills outstanding”. In due course he received an invoice dated 6 October 2004, claiming outstanding fees in the sum of $80,238.50. Included in that figure was a sum of $55,000 for counsel’s fees for work done by Mr Glissan QC and Mr Manion. The invoice claimed to be in respect of work done since 1 June 2003.

35 Ms Perla gave evidence that she had sent the invoice having determined from the file what she believed to be the extent of the outstanding fees. The evidence does not indicate what arrangements (if any) were then put in place concerning the payment of the fees.

36 The second defendant told his sister that the amount of fees claimed was incorrect and that it did not allow for moneys which had already been paid. Laura then contacted Mr Obeidat and as a result, a further document prepared by him, which was described as “an account summary”, was received by the second defendant some time in November 2004. The effect of that document was to suggest that the defendants in fact owed $54,944.52 in outstanding fees. It also revealed that nearly $90,000 in fees had been paid by the defendants to that point in time. The second defendant said, having received the account summary, that he had the following conversation with Mr Obeidat:

SECOND DEFENDANT: Akram, I’ve got your summary. I hope you don’t expect us to pay the $54,000.00 in 7 days?

OBEIDAT: No, just pay it about 3 weeks before the end of March and everything will be on track.

SECOND DEFENDANT: I’ll do the best I can. What is this thing about the $10,000.00 per day for the hearing?

OBEIDAT: I’m not sure of what the exact cost will be. It could be anywhere from $8,000.00 to $10,000.00 per day, but as a maximum it will be $100,000.00 if we stay in Court for 2 weeks.

SECOND DEFENDANT: Do you think it’s going to take that long?

OBEIDAT: It shouldn’t, but that’s what we have estimated so far.

SECOND DEFENDANT: Just try to get it over and done with as quickly as possible and I’ll try to get the $54,000.00 to you by then.

OBEIDAT: No problems.

37 The second defendant maintained that at no time did they discuss “the payment terms in relation to the hearing costs”. That part of the conversation which concerned the daily fee for the hearing was no doubt a reference to a notation at the foot of the account summary which simply read: “Matter is listed for hearing on 29 March 2005 for two weeks. Estimate (sic) costs for the hearing is $10,000 per day.”

38 The second defendant said that after he received the Statement of Liquidated Claim and the Notice of Intention to Cease Acting he again rang Mr Obeidat and inquired as to why he had sent those documents to him. He said that Mr Obeidat replied, “There must be some mistake. Fax it to me and I’ll take care of it.” The second defendant said that at no stage thereafter were he and his father pursued for the monies claimed by Perla & Jordan in the Statement of Liquidated Claim; nor did they ever receive a Notice of Ceasing to Act. He said that as far as they were concerned, the firm continued to act on their behalf. Moreover, the second defendant said that he continued to pay off the outstanding account. The second defendant prepared a document entitled Schedule of Payments, which indicates that during the period between when he received the account summary and the date of the hearing, the defendants made payments totalling $43,500 to Perla & Jordan.

39 On about 21 February 2005, the second defendant said that he received the letter from Ms Brady, dated 14 February 2005, informing him that she had been advised that Perla & Jordan were no longer acting for him and his father. He again rang Mr Obeidat who asked him, the second defendant said, to fax the letters to him. He duly did so and copies of the faxed letters are in evidence. The second defendant said that Mr Obeidat then rang him and in respect of the letter said to him, “Don’t worry about it everything is alright … just make sure you get the bill paid.”

40 Nonetheless, the second defendant discussed the matter with the first defendant, who asked him to arrange a meeting with Mr Obeidat. That meeting was held on 10 March 2005. Given its significance to these proceedings, it is convenient to set out in full the conversation which the second defendant said took place at the meeting:

FIRST DEFENDANT: Akram, what’s going on? Why are we being mistreated like this?

OBEIDAT: What do you mean? How are you being mistreated?

FIRST DEFENDANT: Why are you telling Customs that you are not going to act for us? Is it because of the money?

OBEIDAT: It’s not me that is asking for the money it is the barristers who want their money. If it was my money, I would wait.

FIRST DEFENDANT: Don’t worry about the money. I told you when I first met you that we weren’t going anywhere else. We’ve paid you over $100,000.00 so far. We are honest people and we don’t leave our bills unpaid.

OBEIDAT: Like I said Mr Afiouny, it’s not me it’s the barristers who want there (sic) money.

SECOND DEFENDANT: That’s no problem, but you can’t just send us a $54,000.00 bill and expect us to pay in such a short period. We’ve paid most of it it off and you can see that we’re not running away, why can’t you see that?

OBEIDAT: I can see that and I do understand, just leave it with me and I’ll sort it out.

FIRST DEFENDANT: Well we’ve got $10,000.00 here for you. According to your account summary that leaves about $20,000.00. From now until the hearing we should be able to have the rest paid. Explain this to the barrister. Tell him we’ve had to borrow from family and friends and it’s very embarrassing.

[The first defendant then gave Obeidat $10,000 in cash]


OBEIDAT: I’ll talk to them and try to get the case delayed.

SECOND DEFENDANT: What does that mean? Are they going or not?

OBEIDAT: Don’t worry, I’ll take care of it. I’ll go to Court myself if I have to.

SECOND DEFENDANT: So you’re going to go to Court?

OBEIDAT: Yes.

SECOND DEFENDANT: Akram, I want to be sure?

OBEIDAT: Don’t worry.

FIRST DEFENDANT: Do we have to meet with the barrister before the Court?

OBEIDAT: No, don’t worry, you don’t have to go, I’ll take care of it.

SECOND DEFENDANT: We don’t have to go to Court?

OBEIDAT: No, if I need you I’ll let you know.

41 As a result of that conversation, the second defendant said that he believed that Mr Obeidat would attend Court on 29 March on their behalf and that they would not be required to attend. The first defendant gave evidence in a similar vein. On 12 March, the second defendant said that he made a further cash payment of $5,500 to Mr Obeidat towards the outstanding fees.

42 On 30 March, the second defendant said that he contacted Mr Obeidat. He said that they had a conversation to the following effect:

SECOND DEFENDANT: Hi Akram, how did it go?

OBEIDAT: Nothing really because nobody attended court.

SECOND DEFENDANT: What do you mean?

OBEIDAT: I told you I wasn’t going unless I had all of the money that was owing to me.

SECOND DEFENDANT: But we spoke about this in front of my father, and you said that you were going to go to Court.

OBEIDAT: No I told you I wasn’t going.

SECOND DEFENDANT: You’re a liar. I can’t believe what you’re saying. My father was there and my brother was there and you said that you were going to Court in front of them.

43 The second defendant gave evidence that his attention was then drawn to press coverage of the outcome of the proceedings.

44 On 4 April, the second defendant said that he had a meeting with Mr Obeidat and that they had a conversation to the following effect:

SECOND DEFENDANT: What is going on? You told us that you would get the date delayed and that we did not have to go to the court. The case has been decided and we have to pay $4.5 million.

OBEIDAT: Don’t worry, we can lodge an appeal and get the hearing to start again, but we can’t get the appeal started until you pay off the account owing.

SECOND DEFENDANT: Are you sure you can fix this problem?

OBEIDAT: Yes we’ve got 28 days to lodge an appeal and open up the case but you have to fix the account up so we can meet with the barrister.

45 He said that he then gave Mr Obeidat a sum of $7,150 in cash, followed by a further sum of $6,000 in cash three days later. That, to his mind, meant that all outstanding fees, according to the account summary, had then been paid. He said that his father also paid Mr Obeidat $5,000 in cash “to commence the appeal papers”. In all, the second defendant said that he and his father paid Mr Obeidat just under $150,000 in fees. In fact, he maintains that they paid him somewhat in excess of what was owed. He said that at no stage did they sign a fee agreement with the firm and the only disclosure concerning their legal costs was in the letter of 11 June 2002 (to which reference was made earlier). Nor were they informed that Ms Perla had unilaterally increased the firm’s hourly rate from $200 to $250. The question of the amount of fees paid to the firm remains somewhat uncertain. Ms Perla nevertheless accepted in cross-examination that her firm had received in excess of $100,000 in fees from the defendants.

46 Whilst on the question of costs incurred during the course of these proceedings, it is convenient to refer briefly to a further affidavit sworn on 30 March 2005 by Ms Brady which was relied upon in the proceedings before Newman AJ. She estimated that the costs incurred by the plaintiff to that point in time were in the order of $170,000.

47 In May 2005, the second defendant was informed by his sister, Laura, following a meeting with Mr Obeidat, that they would have to find a new solicitor as his office was closing. As I understand the evidence, that was the first occasion on which he learnt that it was closing.

48 The second defendant was cross-examined at some length by counsel for the plaintiff in an endeavour to demonstrate that he was closely involved with each of the consignments. He conceded, for example, that he had been in Bali when arrangements for the first consignment were made. Nevertheless the second defendant maintained his denial that he knew nothing of the cigarettes having been concealed in the containers.

49 The second defendant also denied a proposition put to him to the effect that he knew that if he had not paid all outstanding fees then no one was going to appear for him at the hearing. The flavour of his evidence is apparent from the following exchanges:

Q. You understood as at the time that you were speaking to Mr Obeidat on 10 March that you would have to go to Court to give your version of events in this prosecution?
A. I asked Mr Obeidat this and he told me that you don't need to go for the time being. When I call you or when I tell you, when I need you I will call you. This is what I was told. I didn't know that I had to attend Court. I would have came if I knew that Mr Obeidat wouldn't have come. I would have came myself and explained myself but he told me you don't have to come, any time of any Court from that time that Court started with this situation till the time I left him, I did not attend one Court case because I wasn't told to attend any Court cases. If I was told to attend I would have came and explained myself. But he didn't tell me to come.

Q. Did you think that eventually you would have to go to Court?
A. Eventually, of course, I have to come and explain myself but I wasn't told by him.

Q. So what did you understand was going to happen? That this technique or scheme of delaying things was what was going to happen?
A. Sir, I don't know what was going to happen because I've never been through something like this.
…

Q. That's what he was going to try and do, delay things?
A. That's what he told me, sir.

Q. By doing what?
A. By delaying things.

Q. But how?
A. I don't know, sir, that's that was his job. I never got - I never asked him these kind of things.

Q. So you knew, didn't you, that the solicitors are saying we no longer act for you and they had written a letter to that effect? You knew that, didn't you?
A. No, sir, I didn't know that because Akram was telling me something and the papers were telling me something . (T 65)

50 Concerning the phone call on 30 March the second defendant gave the following evidence:

Q. What he told you in this phone call was what he was asserting he was saying "I previously told you that I wouldn't go to Court", is what he was now saying to you, wasn't he?
A. Yes, now after it happened.

Q. Yes?
A. Yes.

Q. But this is what apparently you said that he is now saying you see because we've only got your version of it?
A. Sorry.

Q. And you say, "we spoke about this in front of my father and you said you were going to go to Court"?
A. Yes, sir.

Q. So you were asserting what you are saying now is incorrect, in effect, in this phone call. You are saying: No, you didn't say that you said something different?
A. That's what he told us before, he told us something before and then he did something else. (T 67-8)

51 The first defendant swore an affidavit on 9 November 2005. He said that he had had no formal education and that his capacity to read, write and speak English was limited. Indeed, he gave evidence with the assistance of an interpreter. He said that he relied upon his daughter and the second defendant to deal with the solicitors and to explain to him what was occurring in the proceedings. He said that his involvement with the lawyers was minimal and that even when he attended meetings he did not understand everything that was said.

52 He said that whenever he inquired of Mr Obeidat as to how the case was going, he was reassured that everything was fine and that he need not worry. He said that Mr Obeidat told him: “You’re innocent and I’ll get you off, we need to focus on Bilal”.

53 The first defendant corroborated his son’s account of the meeting which they had had with Mr Obeidat on 10 March. Shortly after 30 March, he said that his son informed him that they had “lost the case … because nobody went to Court for us”. In early April, the first defendant said that he had a meeting with Mr Obeidat and Mr Manion of counsel. Mr Obeidat told him that, “from now on you will be dealing directly with the barrister and not with me”. He was then requested to pay Mr Obeidat $5,000 “for the barrister to commence your appeal”. He said that he paid that money in cash and when requested to do so, a week later, he paid a further $3,000 in cash “to pay the filing fee for the appeal”.

54 In supplementary affidavits each of the defendants again denied the allegations which had been raised against them together with the essential matters upon which the plaintiff relies in its case against them. In particular, each denies having any knowledge of the presence of the cigarettes in the various containers.

The evidence of the plaintiff

55 The plaintiff subpoenaed Ms Perla to give evidence. She declined to provide an affidavit to the plaintiff’s solicitor. She gave evidence that in her view her communications with the defendants would attract a claim of legal professional privilege notwithstanding the fact that the defendants had apparently waived privilege by what they had revealed in their own affidavits. She also took the view that she was under no obligation to provide an affidavit. Be that as it may, she nevertheless gave oral evidence and was subjected to cross-examination.

56 She initially gave evidence that she had ceased to practice on 8 January 2005. She did so, she said, because she was worn out with the stress of running a business and “with clients not paying bills”. Her later evidence as to whether she in fact ceased to practice as at that date was, as she appeared to concede, rather confusing. She informed the Law Society on 13 January that she was in the process of winding up her practice. On another occasion in her evidence she said that she was still operating but only to chase up old debts. She also told the Law Society that she was finishing off a few files.

57 Ms Perla gave evidence that she had not acted for the defendants at the hearing because “we had ceased to practice”. Nevertheless she later said that she had filed the Notice of Appeal on behalf of the defendants at a time when she “had ceased business”. As to that matter, she gave the following evidence:

Q. And at some stage were you or your firm asked to do anything in relation to the judgment that had been entered against the Afiounys?
A. I'm not sure whether it was in relation to the judgment but I know that I said, you know, what's gone wrong, why didn't - I thought that they had engaged the counsel directly because that's what I thought had proceeded and I said "why didn't the barristers attend" and anyway I was really not in a lot of - I was not in the know at the time . I didn't know what had happened and Akram said, "I'm going to attend with them, help them out. I'm going to attend on counsel" and I think they were going to put in a notice of - sorry, I'm not sure - but I think it was a Notice of Appeal and appealing that decision and he just said he was going to help them out with the language and also because he felt because they'd had a very bad outcome and there was no-one there in attendance and something had been misunderstood. Obviously he went and attended with counsel in order to get that drafted and I'm very upset actually with Mr Manion in this respect because he emailed me the document to have filed in Court even though I wasn't practising. He was quite aware that I wasn't practising and he left it to the very last day and I wasn't - I really did that out of obligation to the client, not because of any other reason. Only my obligation to myself really in terms of my professionalism because I really didn't have any real obligation to the client. (T 96) (emphasis added)

58 In cross-examination on this topic she gave the following evidence:

Q. And you were doing what you could to salvage the matter in light of what had happened at the hearing on the 29 March 2005?
A. I did this to assist the client who found himself in difficult circumstances. Obviously, in my opinion, due to some misunderstanding about the hearing date and their obligation at that time .

Q. Did you ever write the clients, Afiounys, a letter making it clear that they should attend court on 29 March 2005?
A. I did not. (T 127) (emphasis added)

59 She gave the following evidence as to why she had issued the statement of liquidated claim in respect of the outstanding fees:

Because of the urgency of getting some monies in from these clients, basically prior to us closing the practice and all, there was a series - over the previous 12 months, cheques continued to bounce and I said to Akram that I was concerned that we were going to have a lot of trouble getting monies in and he said, "Well, we'll issue a statement of claim" and I said, "Well, you'll have to work out exactly what they owe" and he drafted this, which I approved and he said, "The best way to do it is, we'll just put out those bills" because we did not have a lot of time and he wasn't able to quantify exactly what had been paid and what was owing at that stage. But he said, "Let me just do it this way" and then if they defend it and we will work out at that stage when they put on their defence and if the matter goes to hearing, we'll work out exactly what is owing. But for the moment, just for the purpose of putting pressure on these clients, because they needed some form of pressure, they weren't paying their bills, we issued the statement of claim on the basis of two outstanding invoices from the barristers. There was - I do not say - we knew that the $55,000 was not owing. It was just a matter of getting the ball rolling so that we could sit down with the clients, when they knew that there was - we were suing them for fees, that we could then sit down and do what in fact then happened. You know, the payments were made. Laura started checking her accounts, we started checking ours and the amount was then finally paid, but that amount of 55,000 was based on barristers' outstanding invoices. It is not a true reflection of what we believed was owing. It was a matter of then getting the client to sit down with us and to decide --- (T 117-8).

60 She agreed that a letter had not been sent to the defendants advising them that the firm was winding up until 19 May 2005 (which was of course some time after their matter was scheduled to be heard). Moreover, she made no effort to attend court on 29 March 2005 to explain the position. She said that she saw no reason to do so because she believed that a Notice of Ceasing to Act had been filed. She nonetheless accepted that no such notice had been filed. She said that her failure to do so was due to an oversight.

61 She agreed that at no stage was a letter sent to the defendants informing them that the firm was no longer acting for them. When she was asked why no such letter had been written, she said: “I was very busy …I did not have time”.

62 On that same topic she gave the following evidence:

Q. You accept that even on your assertion as to the period during which you acted for these people that you owed them professional obligations?
A. Only whilst I was still acting for them actively, and I think they understood - they must have understood quite clearly that on several occasions we did not believe we were acting for them because the bills were unpaid. Throughout 2004, I think, Akram put them on notice on two or three occasions that we regarded the retainer terminated because they did not honour their bills.

Q. Were those notices in writing?
A. Yes, that's all in the emails he had with them.
…

Q. And when were these emails sent?
A. Throughout 2004.

Q. And certainly, even if one accepts that emails were sent by Akram about payments, is that right?
A. About continuing to act for clients that don't pay their bills.

Q. There may have been threats contained within emails but the fact of the matter was your firm continued to act?
A. Because--
…
I can't answer that one with a yes or no. May have been intermittent periods we continued to act until the next cheque bounced .

Q. You say with these clients there may have been periods where you were acting and then there were periods where you were not acting and then there were periods where you were acting again. Is that what you are saying?
A. They revoked their instructions by dishonouring cheques throughout 2004.
…

Q. Were there periods when you were acting for them followed by not acting for them followed by periods when you resumed acting for them. If you can't answer it say you can't answer it?
A. I can't answer that.

Q. Why can't you answer it?
A. Because, although I believe there were periods in which they made it difficult for us to continue to act for them we always diligently looked after the file because if there was a court case coming up, or court date sorry, court date coming up or something coming up we still attend to that although technically. Just for the same reason I filed the notice of appeal, I wasn't acting for him but I still did that because I felt that he was in circumstances where he needed someone to step inform (sic). I did not act voluntarily. So I don't know whether I was acting . (T 125 -126) (emphasis added)

63 The plaintiff also relied upon two affidavits sworn by Ms Brady and an affidavit from Ms Morgan, another solicitor who was acting on behalf of the plaintiff. Those affidavits, to which were attached various documents, were formal in nature. Neither of those witnesses was required for cross-examination. Also in evidence were a number of documents and other material concerning the two consignments, together with the transcript of the proceedings before Newman AJ.

64 For completeness it should be observed that Mr Obeidat did not provide an affidavit and nor did he give evidence. Department of Immigration records indicate that Mr Obeidat departed Australia on 15 January 2005 and that he returned on 27 January 2005. He departed again on 18 August 2005 and returned again on 12 September 2005. He again departed on 11 October 2005 and has not since returned to Australia. Ms Perla gave evidence that he is now living in Jordan. I am quite satisfied however that Mr Obeidat was made aware both by Ms Perla and by Ms Morgan of the nature and scope of the allegations raised by the defendants prior to his departure from Australia. Indeed, Ms Perla gave evidence that she specifically told Mr Obeidat, whilst he was back in the country (presumably some time during his visit of September/October 2005), to put down in writing what he recalled but that he never got around to doing so.

Do the defendants have an arguable case?

65 However this aspect of the matter may be characterised, it is apparent that I am not required to undertake a comprehensive analysis of the merits of the respective cases and to come to any concluded determination as to the issues which are thrown up for consideration. My task is a rather more confined one. It is to determine whether, upon the material before me, there is an arguable or viable defence; or, as the question is sometimes posed, whether there is a triable issue.

66 It is not in dispute that three containers containing large quantities of valuable cigarettes, which were concealed amongst otherwise relatively cheap products, arrived in Australia on 3 and 17 April 2001 respectively. It may be observed that the cigarettes were secreted at the back of each of the containers and were not immediately apparent when the containers were first opened. It is not in dispute that the second defendant was clearly involved in making arrangements for the consignment of the three containers at a time when he was in Indonesia. Those arrangements were made either through, or in conjunction with, his agent in Bali. Moreover, the defendants’ business address and other details were listed on the various Customs documents, from which it can be readily inferred that they were the intended consignees of the containers. Furthermore, the first defendant made contact with his customs broker and requested that he clear the first container. He apparently did so at his son’s behest. As I have said, however, each of the defendants denies any knowledge that the containers contained cigarettes. They each said that they only expected that mineral water as well as other items such as biscuits would be in the containers.

67 Counsel who appeared on behalf of the defendants conceded that the second defendant’s conduct gives rise to “certain suspicions”. Nevertheless, as counsel pointed out, there is no evidence that he had anything to do with packing the containers or that he was even present as that was occurring. Counsel also contended that the cases presented against the two defendants were “materially different”. I am not in a position to draw such a distinction and I have proceeded upon the basis that suspicions must inevitably attach to the first defendant’s conduct as well.

68 Nevertheless, two important considerations remain. The fact is that as a result of the High Court’s decision in Labrador (supra), the plaintiff must establish its case in each instance to the criminal standard, that is beyond reasonable doubt. The second consideration is that upon the critical question that is in issue, namely whether the defendants knew of the existence of the cigarettes in the containers, its case is entirely circumstantial. No admissions or other form of direct evidence is available which would enable the plaintiff to establish this aspect of the matter. Its case will depend entirely upon the drawing of inferences. That, in turn, will require an evaluation of the evidence which is adduced, encompassing an assessment of the credibility of the various witnesses, including the defendants themselves (should they give evidence). I am not in a position at this stage of the proceedings to make such an evaluation or assessment.

69 The plaintiff will also have to exclude any rational hypothesis which may be consistent with the innocence of each of the defendants. In that context, I was provided with a summary of facts in respect of an allegation that a Rob Karam had been charged in August 2004 for his role in an alleged importation of cannabis resin. The plaintiff provided that material to the defendants in discharge of its duty of disclosure. His freight forwarding company was said to be involved in that importation. His company also performed freight forwarding duties in relation to the present consignments. Without hearing from Mr Karam I am hampered in being able to make an assessment of his evidence and what light (if any) it might shed upon the plaintiff’s case.

70 In all the circumstances, and notwithstanding the fact that suspicion properly attaches to the actions of the defendants, I am satisfied that the defendants each have an arguable case.

Do the defendants have a reasonable explanation for not attending at the hearing before Newman AJ?

71 The essence of the case advanced on behalf of the defendants are the representations which they say were made to them by Mr Obeidat, and in particular those made during the meeting of 10 March, upon which they say they relied. The effect of those representations, according to the defendants, were reassurances from Mr Obeidat that they need not appear in Court and that he would “take care of it”.

72 The essence of the case propounded on behalf of the plaintiff is that it can be inferred that the defendants knew that unless they paid all outstanding fees before the hearing, then no one was going to appear for them at it. Because those fees had not been paid in full, so went the plaintiff’s submission, neither of them in fact believed that any one would appear on their behalf; or, if they did hold such a belief, there was no reasonable basis for doing so.

73 The plaintiff pointed to the fact that there were, as the defendants well knew, outstanding fees due to the firm. So much was apparent from the fact that a Statement of Liquidated Claim had been issued and indeed from the contents of the conversation of 10 March itself. Furthermore, the plaintiff contended that the defendants knew from the Notice of Intention of Ceasing to Act and from the letter of 14 February 2005, from Ms Brady, that the firm was no longer acting for it. The plaintiff also pointed to the fact that the defendants never informed Ms Brady at any stage as to their representation, notwithstanding having promised her that they would so advise her. Moreover, it is submitted that her letter to them of 18 March apparently did not cause them to contact Mr Obeidat, notwithstanding the fact that as of that date they believed that he would be appearing at the hearing on their behalf.

74 The plaintiff submits that the defendants’ version of the conversation which is alleged to have occurred on 10 March should be rejected. It is submitted that it is inherently unlikely that Mr Obeidat “would have made any promises about future representation of the [defendants] when the practice of Perla & Jordan had either closed down or was in the process of closing down and that firm had previously provided the applicants with a Notice of Intention of Ceasing to Act”. This was particularly so, it was contended, bearing in mind that Mr Obeidat was not a solicitor and consequently had no right of appearance in Court. It was also submitted that it was inherently unlikely that he would have made any promises about future legal representation whilst there were still outstanding fees to be paid.

75 However, there are a number of other matters that have to be weighed in the balance. As I have said, the case for the defendants is that they relied upon the various representations which they contend were made to them by Mr Obeidat over a period of time and in particular on 10 March. The stark reality is that that evidence remains uncontradicted by the only person who is capable of doing so. As I have said, Mr Obeidat did not provide an affidavit and nor did he give evidence, notwithstanding the fact that he was made aware of the substance of the matters raised by the defendants as to what he had allegedly told them. Moreover, as I have observed, he was in Australia when he was made aware of them and was thus in a position to repudiate them had he chosen to do so.

76 Consequently, the only material that I have before me is the direct evidence of the defendants and whatever inferences I can draw from the balance of the evidence which is capable of shedding light upon the plausibility of their accounts.

77 Each of the defendants gave evidence in a fashion which gave me no reason not to accept it. Neither of them was shaken in cross-examination and particularly not in respect of the reasons which they advanced for not attending the hearing. Moreover, the second defendant candidly admitted that he had discussed his recollection of the March 10 meeting with the first defendant in order to refresh his memory. On the other hand, what clearly emerges from the evidence is that the defendants are each unsophisticated men who are quite unfamiliar with the intricacies of the litigation process, particularly in a case of the current kind. This is, as I have observed, a case in which the solicitors themselves formed the view that the assistance of counsel was required at every stage.

78 I am also satisfied that each of the defendants had little awareness of the way in which the proceedings were being conducted on their behalf. The difficulties for the first defendant were compounded both by his limited formal education and by his lack of familiarity with the English language. The second defendant was, as I have said, a very young man at the time these proceedings were instituted. Each of them understandably took comfort in the fact that Mr Obeidat, with whom they were able to converse in Arabic, had been recommended to them. In all those circumstances they were entitled to place their trust in him to act in their best interests and I am satisfied that that is indeed what they did. It is also to be recalled that at no stage of these protracted proceedings had the defendants attended, or been required to attend, at court.

79 There is a good deal of evidence concerning the fees which were paid by the defendants to the firm of solicitors Perla & Jordan. It is not easy to reach a definitive conclusion as to the precise amount that was paid. That is in large measure due to the somewhat unsatisfactory state of the firm’s accounting records and to the fact that a number of dishonoured cheques were presented by the defendants. Nevertheless, it is common ground that both parties incurred very substantial legal expenses and that Perla & Jordan received in excess of $100,000 in fees from the defendants. From that fact alone it can be inferred that the defendants were very committed to doing what was necessary in order to properly defend the proceedings which had been brought against them.

80 It would appear that the decision by Perla & Jordan to issue the Statement of Liquidated Claim had the desired effect in that it pressured the defendants into reaching an agreement as to the outstanding fees. It is also clear that the defendants continued to make payments to Perla & Jordan in respect of those fees in the period following receipt of the claim. It was reasonable in the circumstances for the defendants to assume that the firm was still acting for them. There was no evidence before me to suggest that the proceedings in the Local Court in respect of the claim for counsel’s fees were ever progressed. Moreover, the defendants were not given any reason, at least at that stage, as to why the firm was no longer intending to act on their behalf. They were certainly not informed, if it indeed be the reason, that Ms Perla intended closing the firm. It seems clear that they only learnt of that matter well after the hearing date had passed. One would have thought in the circumstances that the defendants were entitled to know that the firm was closing down and what consequences (if any) such a decision would have for their future representation, particularly at the March hearing.

81 If Ms Perla had formed the view that she was not going to continue acting for the defendants, then she should have expressly informed them of that fact (or had Mr Obeidat do so). A letter in those terms was after all sent to the plaintiff’s solicitors. Ms Perla’s explanation for not having written such a letter, namely that she did not have time, is plainly unacceptable. In all the circumstances, the defendants were entitled to believe that the Notice of Intention of Ceasing to Act would not have had any continuing operation.

82 Much of the difficulty in the present case arises from a lack of clear communication between Perla & Jordan and the defendants. It is not beyond the bounds of possibility that Ms Perla and Mr Obeidat themselves had different expectations in relation to the continuing representation of the defendants. It may also be the case that their respective views changed at different times. I am satisfied at the very least that there was a state of considerable confusion on the part of the various parties. Indeed, Ms Perla said herself that she was not sure if the firm was still representing the defendants at times because of the outstanding fees and the fact that dishonoured cheques had been sent by them to meet those fees. Ms Perla also conceded that there was confusion at one stage as to exactly what fees had been paid and what remained to be paid. There also appeared to be an absence of clear communication upon the important question of the terms and conditions upon which fees were to be paid. This was a case, regardless of any other professional obligations that may have existed, in which a written agreement as to those matters would have avoided any argument as to what was required.

83 This lack of clear communication was undoubtedly conducive to there having been a state of confusion on the part of the various parties. At one point in her evidence, Ms Perla refers to the fact that a “misunderstanding” of some kind must have been the reason why counsel did not appear at the hearing. In the circumstances which I have described, it is at least a reasonable possibility that that is what occurred. In my view a satisfactory explanation for the absence of the defendants from the hearing has been established, that is that they believed that their legal representative would be appearing on their behalf and that they need not appear at least until such time as they were informed that they were required. I am satisfied, particularly given the state of confusion which existed, that that belief was reasonably founded.

84 Accordingly, I have reached the conclusion that it is in the interests of justice to set aside the judgment entered on 21 April 2005. The parties are agreed that in that event the costs of the motion should be costs in the cause.

85 Counsel for the defendants raised a number of other matters which involved criticism of the conduct of Mr Obeidat, and to a lesser extent, Ms Perla. The criticism related to various areas of their practice and included in particular the unreasonableness of the fees which were charged. Except insofar as those matters bear upon the findings to which I have referred, I have not found it necessary to determine them, especially as I have not heard from Mr Obeidat.

Orders

86 1 That the judgment entered on 21 April 2005 be set aside.

2 That the matter be placed in the Registrar’s next callover list.

3 That the costs of the Motion be costs in the cause.

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