The conclusion the guarantee was executed by Ms Cheung and was not forged
70 Ms Cheung challenges the primary judge's finding that the guarantee was executed by Ms Cheung and was not forged (Reasons, [8]). This issue arises in Ms Cheung's appeals in proceedings VID 255/2016 and VID 257/2016, as well as in her applications for an extension of time and leave to appeal in VID 256/2016. In each of VID 255/2016 and VID 257/2016, Ms Cheung appeals from a judgment of the Federal Circuit Court to this Court under s 24(1)(d) of the Federal Court of Australia Act 1976 (Cth).
71 An appeal from a judgment of the Federal Circuit Court to this Court under s 24(1)(d) of the Federal Court of Australia Act is not conducted de novo, nor is it an appeal in the strict sense. Like appeals from judgments of single judges of this Court, it is an appeal by way of rehearing: Zoltaszek v Downer EDI Engineering Pty Ltd [2011] FCA 744 at [3] per Flick J; RailPro Services Pty Ltd v Flavel [2015] FCA 504 at [77] per Perry J.
72 On an appeal by way of rehearing, the appellate court's powers are exercisable only if the appellant can demonstrate error of fact or law in the judgment under appeal: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [22]-[25] per Allsop J (as his Honour then was), Drummond and Mansfield JJ agreeing.
73 In Robinson Helicopter Company Inc v McDermott (2016) 331 ALR 550, French CJ, Bell, Keane, Nettle and Gordon JJ said at [43]:
A court of appeal conducting an appeal by way of rehearing is bound to conduct a "real review" of the evidence given at first instance and of the judge's reasons for judgment to determine whether the judge has erred in fact or law. If the court of appeal concludes that the judge has erred in fact, it is required to make its own findings of fact and to formulate its own reasoning based on those findings. But a court of appeal should not interfere with a judge's findings of fact unless they are demonstrated to be wrong by "incontrovertible facts or uncontested testimony", or they are "glaringly improbable" or "contrary to compelling inferences".
(Footnotes omitted.)
In the footnotes to the above passage, the High Court referred to Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479-481 per Deane and Dawson JJ; Fox v Percy (2003) 214 CLR 118 at [25], [28] and [29] per Gleeson CJ, Gummow and Kirby JJ; and Miller & Associates Insurance Pty Ltd (ACN 089 245 465) v BMW Australia Finance Ltd (ACN 007 101 715) (2010) 241 CLR 357 at [76] per Heydon, Crennan and Bell JJ.
74 In Devries, Deane and Dawson JJ stated at 479-480:
An appellate court which is entrusted with jurisdiction to entertain an appeal by way of rehearing from the decision of a trial judge on questions of fact must set aside a challenged finding of fact made by the trial judge which is shown to be wrong. When such a finding is wholly or partly based on the trial judge's assessment of the trustworthiness of witnesses who have given oral testimony, allowance must be made for the advantage which the trial judge has enjoyed in seeing and hearing the witnesses give their evidence. The "value and importance" of that advantage "will vary according to the class of case, and, … [the circumstances of] the individual case". If the challenged finding is affected by identified error of principle or demonstrated mistake or misapprehension about relevant facts, the advantage may, depending on the circumstances, be of little significance or even irrelevant. If the finding is unaffected by such error or mistake, it will be necessary for the appellate court to assess the extent to which it was based on the trial judge's conclusions about the credibility of witnesses and the extent to which those conclusions were themselves based on observation of the witnesses as they gave their evidence as distinct from a consideration of the content of their evidence. Judges are increasingly aware of their own limitations and of the fact that, in a courtroom, the habitual liar may be confident and plausible, and the conscientious truthful witness may be hesitant and uncertain. In that context, it is relevant to note that the cases in which findings of fact and assessments of credibility are, to a significant extent, based on observation of demeanour have possibly become, if they have not always been, the exception rather than the rule. Indeed, as Kirby A.C.J. pointed out in Galea v Galea, in many cases today, judges at first instance expressly "disclaim the resolution of factual disputes by reference to witness demeanour". However, this does not deny that in many cases a trial judge's observation of the demeanour of witnesses as they give their evidence legitimately plays a significant and even decisive part in assessing credibility and in making factual findings. …
(Footnotes omitted.)
75 In Fox v Percy, Gleeson CJ, Gummow and Kirby JJ stated at [25], [28]-[29]:
25 Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. Appellate courts are not excused from the task of "weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect". In Warren v Coombes [(1979) 142 CLR 531 at 551], the majority of this Court reiterated the rule that:
"[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it."
As this Court there said, that approach was "not only sound in law, but beneficial in … operation".
…
28 Over more than a century, this Court, and courts like it, have given instruction on how to resolve the dichotomy between the foregoing appellate obligations and appellate restraint. From time to time, by reference to considerations particular to each case, different emphasis appears in such reasons. However, the mere fact that a trial judge necessarily reached a conclusion favouring the witnesses of one party over those of another does not, and cannot, prevent the performance by a court of appeal of the functions imposed on it by statute. In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings.
29 That this is so is demonstrated in several recent decisions of this Court. In some, quite rare, cases, although the facts fall short of being "incontrovertible", an appellate conclusion may be reached that the decision at trial is "glaringly improbable" or "contrary to compelling inferences" in the case. In such circumstances, the appellate court is not relieved of its statutory functions by the fact that the trial judge has, expressly or implicitly, reached a conclusion influenced by an opinion concerning the credibility of witnesses. In such a case, making all due allowances for the advantages available to the trial judge, the appellate court must "not shrink from giving effect to" its own conclusion. Finality in litigation is highly desirable. Litigation beyond a trial is costly and usually upsetting. But in every appeal by way of rehearing, a judgment of the appellate court is required both on the facts and the law. It is not forbidden (nor in the face of the statutory requirement could it be) by ritual incantation about witness credibility, nor by judicial reference to the desirability of finality in litigation or reminders of the general advantages of the trial over the appellate process.
(Footnotes omitted.)
76 Capital Finance's submissions on the challenge to the primary judge's finding that the guarantee was executed by Ms Cheung and was not forged can be summarised as follows:
(a) Ultimately, the evidential contest was one between experts as Ms Cheung's credibility was the subject of an adverse finding by the primary judge. Aside from Mr Holland's depth of experience in the field of handwriting analysis, the fundamental advantage he had in forming his expert view (set out in his report) was that he had regard to original sample signatures of Ms Cheung both pre-dating and post-dating the guarantee.
(b) Ms Ganas, the expert engaged by the Trustees, had no original sample signatures to study at the time he prepared the relevant report (though he had made a study of some original signatures at an earlier time for the sake of a different report). He had no samples pre-dating the guarantee at any time, which he specifically identified as "a limitation on the examination process" (page 4 of Mr Ganas's second report) and he did not account for his analysis of the guarantee in his report in the detail that Mr Holland did.
(c) Mr Ganas concluded that there was "moderate support" for the view that the questioned signatures were not genuine, having regard to the copy documents he used and certain notes regarding his analysis of the original samples (which notes were not produced). In contrast, Mr Holland concluded that in his opinion the writer of the samples signed the guarantee entailing a positive indication that beyond all reasonable doubt the writer of the guarantee was the writer of the signatures on the samples ultimately relied upon (Holland Report, page 4, and annexure B).
(d) The weight of the evidence supported the factual finding below.
77 Although there is no discussion in the reasons of the primary judge of the question whether or not he should 'go behind' the judgment of the Magistrates' Court of Victoria, by embarking on an examination of whether, as Ms Cheung asserted, the guarantee was a forgery, the primary judge in effect decided to 'go behind' the judgment. His Honour was correct to do so. There had not been a hearing on the merits in the Magistrates' Court of Victoria. The initial judgment was obtained in default of filing a defence, and Ms Cheung's application for a re-hearing was dismissed (for reasons which were not made clear in the evidence). Ms Cheung put forward evidence that she did not sign the guarantee. In these circumstances, it was appropriate for the bankruptcy court to 'go behind' the judgment and examine the underlying issue: see, eg, Corney v Brien (1951) 84 CLR 343 at 348 per Dixon, Williams, Webb and Kitto JJ, 357-358 per Fullagar J; Wren v Mahony (1972) 126 CLR 212 at 224-225 per Barwick CJ (with whom Windeyer and Owen JJ agreed); Wolff v Donovan (1991) 29 FCR 480 at 486 per Lee and Hill JJ.
78 Having decided (correctly) to 'go behind' the judgment, in my view the primary judge erred in law and fact in his consideration of the underlying issue.
79 In circumstances where the bankruptcy court decides to 'go behind' a judgment, the onus of proof in relation to the underlying issue falls on the party claiming to be a creditor. In Corney v Brien, Fullagar J said at 358:
The question whether the judgment is to be reopened or "gone behind" at all will, of course, often involve some preliminary investigation of the merits of the attack on the judgment. But, when once the court decides that it will "go behind" the judgment, the cases which I have cited show, in my opinion, that the whole matter is open. When once it is considered proper to "reopen", the only question will be whether there was, in fact and in law, a debt which could legally found the judgment - whether there was in "Truth and Reality" an obligation not of record before there was an obligation of record. If the case should be one of those rare cases (I have not actually found one in the Reports since 1888, when Fry L.J. said that he knew of none) where it is legitimate to "go behind" a judgment entered after trial in court, there would be, I think, no alternative but to re-try the whole case. The matter to be decided is the existence or non-existence of a debt antecedent to the judgment. It has been said on several occasions that the judgment is prima-facie evidence of the antecedent debt. But, when once the inquiry is undertaken, I think that the ultimate burden of proof rests on the person claiming to be a creditor. As Lord Esher M.R. said in In re Fraser; Ex parte Central Bank of London: "The existence of the judgment is no doubt prima-facie evidence of the existence of a debt; but still the Court of Bankruptcy is entitled to inquire whether there really is a debt due to the petitioning creditor".
(Footnotes omitted; emphasis added.)
See also Wolff v Donovan at 487 per Lee and Hill JJ.
80 However, the primary judge appears to have proceeded on the basis that it was for Ms Cheung to establish that her signature had been forged, rather than for Capital Finance to establish that Ms Cheung owed a debt to Capital Finance. The primary judge framed the relevant preliminary question as: "whether, as Ms Cheung strongly asserts, the guarantee from which all this stems, already referred to above, was in fact a forgery" (Reasons, [6]). Paragraphs [145]-[147] of the Reasons, set out in [59] above, approach the matter by reference to Ms Cheung's assertion that her signature was forged. Although the matter is not free from doubt, the primary judge's reference to s 140 of the Evidence Act 1995 (Cth) at [147] of the Reasons appears to relate to a finding of forgery (with such a finding "not to be made lightly"). In the course of the appeal hearing, in response to a question from me, counsel for Capital Finance said that he understood the primary judge's reference to s 140 to indicate that Ms Cheung bore the onus (appeal transcript, page 102). The primary judge's later statement that he had "roundly rejected the central proposition upon which Ms Cheung relies, namely that the original Guarantee was a forgery" (Reasons, [158]) also suggests that he considered Ms Cheung to bear the onus. The primary judge thus appears to have proceeded on the basis of a mistaken principle, namely that it was for Ms Cheung to establish forgery, rather than for Capital Finance to establish that Ms Cheung owed it a debt (and thus that Ms Cheung signed the guarantee). If it is correct that his Honour proceeded on this basis, I do not think it is possible to say that this could not have affected his factual analysis and the finding he reached.
81 Further, the primary judge did not refer to or engage with several material matters which suggested that Ms Cheung did not sign the guarantee:
(a) First, in considering the evidence of Mr Holland, the primary judge did not address the apparent differences between a number of the control signatures, or "signature standards", and the questioned signatures. The questioned signatures were items (A) 1, (A) 2, (A) 3 and 23. The standard signatures relied on by Mr Holland in his conclusion (page 4 of the report) were items (B) 4 to (B) 9 and (C) 13, (C) 16, (C) 17, (C) 18 and (C) 22. It should be noted that item (B) 5 is incorrectly labelled (B) 2 at the top of the relevant page in the annexures to the report (as explained by Capital Finance's counsel at T105). Of the standard signatures relied on by Mr Holland, it is fair to say that items (C) 13, (C) 16 and (C) 22 look different from the questioned signatures. During cross-examination, Mr Holland accepted that item (C) 13 looked different from the questioned signatures (T102.41) and then said that "it didn't really become a major part of my report" and "I didn't measure on C13" (T104). But the opinion in his report was that the questioned signatures were written by the same writer as the signature standards he relied on, which included (C) 13. Further, there is little apparent difference between (C) 13 and (C) 16, another signature standard relied on by Mr Holland. Item (C) 22 looks very different. Although there was no cross-examination specifically on item (C) 22, there was cross-examination generally on the lack of similarity between the signature standards and the questioned signatures (T102, T104-115).
(b) Secondly, in relation to Mr Ganas's evidence, the primary judge stated at [140] of the Reasons that he did not accept the endeavours to discredit Mr Ganas's evidence on the footing that he did not have originals when he prepared his second report, but then went on to say that his source documents "appear to have been copies, something that he conceded was undesirable" (Reasons, [140]). I do not think these statements reflect the whole of the evidence given by Mr Ganas during cross-examination. Mr Ganas did have access to original control signatures when he prepared his first report (dated 14 August 2014). He was asked to use the same control signatures for the purposes of his second report (dated 27 January 2015). At that time, the documents were no longer available so he used the scans and notes from the first report (T92). He did not accept that this was a limitation (T93, T96-97, noted in the Reasons at [93]).
(c) Thirdly, one of the main reasons given by the primary judge for preferring Mr Holland's evidence over Mr Ganas's evidence was that Mr Holland had access to control signatures which both pre-dated and post-dated the guarantee (Reasons, [141]). But most of the control signatures provided to Mr Holland which pre-dated the guarantee were signed "Katie" and he excluded them from consideration (items (C) 10, (C) 11, (C) 12, (C) 14, (C) 15, (C) 19, (C) 20, (C) 21). Only three of the control signatures relied on by Mr Holland pre-dated the guarantee and one of these was item (C) 22, discussed above. Moreover, the primary judge did not have regard to the frequency with which Ms Cheung appears to have signed as "Katie" in the years before the date of the guarantee.
(d) Fourthly, the primary judge stated that it took Ms Cheung "some time" before her assertion of forgery was made (Reasons, [146]). I do not think this reflects the evidence. The sequestration order was made on 17 February 2011. Ms Cheung's then solicitors, Chiodo & Madafferi, wrote to the Trustees on 4 March 2011 that Ms Cheung was wholly unaware of any claim, summons or debt (Reasons, [14]). At Ms Cheung's first interview with the Trustees she disputed signing the guarantee documents (Reasons, [15]).
(e) Fifthly, the primary judge stated that the "form may well have had errors, but as Mr Burness pointed out, such are not uncommon" (Reasons, [147]). This would appear to be a reference to the six-page Business Finance Application (AB tab 10, exhibit "PAD-3" and AB tab 15, Annexure E, item (A) 2). The primary judge did not address the many discrepancies with this document which potentially bore on whether or not Ms Cheung signed the suite of documents. The document has the date 10 July 2004 in the date field (which Mr Lazzaro typed in: T129) but purports to have been signed some time earlier, on 19 June 2004. Page 5 of the form contains details which Ms Cheung contended were incorrect (her mobile phone number, the number of dependents, the years at her present address, the description of her as a "Director-Guarantor", the time in industry, and her outgoings and expenses). There does not appear to have been any dispute below that these details were incorrect. If that be the case, it potentially bore upon whether she actually attended and signed this document (which in turn bore upon whether she signed the guarantee).
(f) Sixthly, the primary judge stated that the report of the Financial Ombudsman Service "relied upon a report which I do not accept" (Reasons, [149]). Assuming that this is a reference to the first report of Mr Ganas, there does not appear to be an express finding, earlier in the Reasons, that the primary judge did not accept that report. And there does not appear to be any good reason not to accept that report. When one compares the questioned signatures with the control signatures considered in that report (which concerned guarantees allegedly signed by Ms Cheung in favour of Mercedes-Benz in 2007) they are markedly different: see AB tab 2, report dated 14 August 2004, page 4 (control signatures) and page 5 (questioned signatures).
82 I have considered whether there is a proper basis to disturb the primary judge's factual finding in circumstances where his conclusion depended, in part, on his assessment of witnesses in the witness box. Although I have read the whole transcript, I do not have the advantage of seeing and hearing the witnesses give their evidence. Nevertheless, I think there is a proper basis to disturb the primary judge's factual finding. Having rejected the evidence of Ms Cheung as lacking credibility, the relevant witness evidence was that of the handwriting experts and Mr Lazzaro. In relation to the handwriting experts, the primary judge considered both to be "excellent witnesses who were clearly experts in their field" (Reasons, [138]). Thus the weighing of their evidence is not enhanced to any significant extent by observation of their demeanour in the witness box; rather it turns on matters such as the contents of their reports and the cogency of their opinions. In relation to Mr Lazzaro's evidence, it is true that the primary judge considered him to be a "good witness" (Reasons, [122]) and his evidence to be "entirely compelling" (Reasons, [150]). But it should be noted that Mr Lazzaro did not recognise Ms Cheung at all (T122) and his evidence was therefore based on his practice. Further, in evaluating Mr Lazzaro's evidence about his practice, the primary judge did not engage with the issues concerning the Business Application Form discussed in 81 above.
83 The matters discussed in [81]-[82] above lead me to conclude that the primary judge's finding that the guarantee was signed by Ms Cheung and was not forged involved factual error.
84 Given the conclusions set out above, it is appropriate to make a finding in place of the primary judge's finding on the question whether or not Ms Cheung signed the guarantee. Approaching the matter on the basis that it is for Capital Finance to establish that it is owed a debt, and thus it bears the onus of proving that Ms Cheung signed the guarantee, I do not think Capital Finance has discharged this onus. My reasons are as follows:
(a) In considering the matter, I have had regard to the primary judge's conclusions on the credibility of witnesses. I therefore put to one side the evidence of Ms Cheung herself.
(b) There is a conflict in the opinions of the handwriting experts as to whether the questioned signatures were signed by the same writer as the control signatures. Both witnesses were well regarded by the primary judge, as noted above. Both reports are cogent and it is difficult to see a clear basis to prefer one report over the other. Although it is true that Mr Ganas was not provided (by the Trustee) with signatures which pre-date the date of the guarantee, he considered a body of control signatures from 2005 to 2014, and said that these were consistent (T96).
(c) There are observable differences between, on the one hand, Ms Cheung's signatures on some of the control documents and, on the other, the signatures on the Capital Finance documents (including the guarantee). I refer in particular to items (C) 13, (C) 18 and (C) 22 in Mr Holland's report.
(d) Notwithstanding the evidence of Mr Lazzaro that he would only ever sign as a witness if he had witnessed the signature being signed before him (T122), there are a number of discrepancies pertaining to the Capital Finance documents which raise doubt as to whether they were in fact signed by Ms Cheung. These have been referred to in 81 above. The inaccuracy of many of the details on page 5 of the Business Finance Application tends to suggest that she was not present, notwithstanding Mr Lazzaro's evidence to the effect that some of these details were not relevant to the decision whether or not to lend the money (T134). Further, although the matter was not explored in cross-examination, it is difficult to see how Ms Cheung and Mr Lazzaro could have signed the Business Finance Application on 19 June 2004, when the document was not printed until 10 July 2004 (as indicated by the footer).
(e) Although I place little weight on this, I note that the guarantee relates to a term purchase agreement entered into by a company controlled by Ms Cheung's then husband and that he was subsequently convicted of fraud. As noted earlier, he was serving a long term of imprisonment at the time of the hearing below.
(f) Similarly, although I place little weight on this, I note that Ms Cheung challenged three other claims against her estate based on guarantees she was alleged to have signed in relation to motor vehicles not for her own benefit. One claim was made by BMW Finance; two claims were made by Mercedes-Benz Finance. In each case, the companies ultimately withdrew their claims. The first report of Mr Ganas (in evidence below) concluded that the guarantees relied on by Mercedes-Benz were not genuine.
85 Taking these matters into account, I conclude that Capital Finance has not established that Ms Cheung signed the guarantee.