Cheung v Burness

1. The appeal be allowed.
2. The orders of the Federal Circuit Court of Australia in proceeding MLG 881/2014 made 3 March 2016 be set aside.
3. In lieu thereof it be ordered that: (a) There be no order as to costs in relation to the costs of and incidental to the hearing before the Federal Circuit Court of Australia on 1, 2 and 4 December 2015. (b) Otherwise, the costs of proceeding MLG 881/2014 be reserved.
4. The matter be remitted to the Federal Circuit Court of Australia for the hearing and determination of any other issues in proceeding MLG 881/2014.
5. There be no order as to the costs of the appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MOSHINSKY J: 1 On 21 November 2016, I published reasons for judgment in relation to two appeals, and applications for an extension of time and leave to appeal, from the Federal Circuit Court of Australia which were heard together: Cheung v Burness (Trustee) [2016] FCA 1381 (the November 2016 Reasons). These reasons assume a familiarity with those reasons. 2 When publishing the November 2016 Reasons, I made orders in each proceeding that the matter be listed for hearing on a date to be fixed for submissions on the form of orders to be made (including as to costs). A hearing about these matters took place yesterday afternoon.

Proceeding VID 256/2016 3 It is convenient to deal first with proceeding VID 256/2016. In this proceeding, Ms Cheung applied for an extension of time and for leave to appeal. I concluded that these applications should be dismissed: see the November 2016 Reasons at [69]. It follows that an order to that effect should be made. I will deal with the question of costs later in these reasons.

Proceeding VID 255/2016 4 I will deal next with proceeding VID 255/2016, which is the appeal in relation to the Annulment Proceeding. In the proceeding below, the primary judge ordered that the application for annulment be dismissed and that Ms Cheung pay the costs of the Trustees and Capital Finance Australia Ltd (Capital Finance). It follows from my conclusions in the November 2016 Reasons that there should be orders that the appeal be allowed and the orders of the primary judge set aside. It was submitted on behalf of Capital Finance, and I accept, that it would be appropriate to reflect my conclusion on the signature issue in a declaration to the effect that Capital Finance has not established that Ms Cheung signed the guarantee. 5 One of the issues that was the subject of submissions yesterday was whether the matter should be remitted to the Federal Circuit Court and, if so, on what basis. It is important to have regard to the way the annulment issue was dealt with below. Apart from dealing with the preliminary questions, the primary judge did not deal with other issues potentially arising in the Annulment Proceeding (such as solvency). In the Reasons at [164], the primary judge stated that, in light of the findings he had made, "the Annulment Application must be seen to have little chance of success". However, he did not hear argument or reach a concluded view on such other issues. As I noted in [10] of the November 2016 Reasons, after the primary judge handed down his reasons, the matter was stood down for a short time to enable the parties to consider the appropriate orders in the proceedings; Capital Finance and the Trustees then made submissions on the orders to be made; Ms Cheung made no submissions in opposition to the orders proposed by Capital Finance and the Trustees. It was in these circumstances that the primary judge ordered that the application for annulment be dismissed. The position now, however, is that I have concluded that Capital Finance did not establish on the balance of probabilities that Ms Cheung signed the guarantee: see the November 2016 Reasons at [85]. In these circumstances, the other issues potentially arising in the Annulment Proceeding may need to be agitated. I do not think it would be appropriate for these issues to be determined by the appellate court in circumstances where they have not been the subject of a hearing or determination at first instance. I consider the appropriate course to be to remit the Annulment Proceeding to the Federal Circuit Court to enable the other issues potentially arising in that proceeding to be heard and determined. 6 I note that it was submitted on behalf of Capital Finance that there should be a re-trial of the issue whether or not Ms Cheung signed the guarantee. I do not accept that submission. That issue was tried by the primary judge and I dealt with the matter on appeal, which was an appeal by way of re-hearing: see the November 2016 Reasons at [71]-[72]. The question whether the primary judge erred in relation to the onus was raised by me with counsel for Capital Finance during the course of the appeal (as noted in the November 2016 Reasons at [80]). It was not suggested that, if I took the view that the primary judge had erred in this regard, the matter should be remitted for a re-trial before the primary judge. 7 Capital Finance submits that, because the primary judge framed the relevant preliminary question as "whether, as Ms Cheung strongly asserts, the guarantee from which all this stems … was in fact a forgery", there had not been a trial on the question whether Capital Finance had established on the balance of probabilities that Ms Cheung signed the guarantee. I do not think this submission reflects the substance of what occurred below. There was no formal order for the determination of preliminary questions. Although the primary judge in the Reasons articulated the preliminary question in the way I have just indicated, in substance there was a trial of the issue of whether or not Ms Cheung signed the guarantee. Capital Finance had the opportunity to lead all the evidence that it wished on that issue. The issue was determined at first instance and has now been determined on appeal. I think it would be quite unfair for the issue to be re-tried. 8 Accordingly, I will make an order that the Annulment Proceeding be remitted to the Federal Circuit Court for the hearing and determination of any other issues arising in that proceeding.

Proceeding VID 257/2016 9 I will now deal with proceeding VID 257/2016, which is the appeal in relation to the Directions Proceeding. Again, it is important to have regard to the process that led to the making of the orders below. Apart from dealing with the preliminary questions, the primary judge did not deal with other issues potentially arising in the Directions Proceeding. Rather, as noted above, after the primary judge handed down his reasons, the matter was stood down for a short time to enable the parties to consider the appropriate orders; orders were then proposed (in relation to the Directions Proceeding, by the Trustees); and Ms Cheung did not oppose those orders. The orders were then made. This took place in the context of the primary judge's finding regarding the signature. There was no hearing on whether, if the finding were otherwise, orders for possession and sale of Ms Cheung's home should be made. I think Ms Cheung should have the opportunity to present arguments on this matter. 10 The Trustees submitted that I should not set aside the orders that had been made on the basis that, in the circumstances that exist, and notwithstanding Ms Cheung's success on the signature issue, it was necessary for the home to be sold to pay for the costs of the administration of Ms Cheung's estate. However, this would either foreclose Ms Cheung's opportunity to present arguments as to why such orders should not be made, or require me to deal with such arguments in circumstances where they have not been dealt with at first instance. In the circumstances, I think the better course is to make orders to the effect that the appeal be allowed; the orders of the primary judge be set aside; and the matter be remitted to the Federal Circuit Court for hearing and determination of any other issues in that proceeding.

Costs 11 Turning to the issue of costs, I will start with the costs of the appeals/applications in this Court. There were two issues agitated on the hearing of the appeals/applications. The first concerned the extension of time issue. The second concerned the primary judge's conclusion that the guarantee was executed by Ms Cheung and was not forged. There was some overlap between the two issues as the signature issue was relevant to merits in relation to the extension of time issue: see the November 2016 Reasons at 68. My assessment is that significantly more time in Ms Cheung's submissions and Capital Finance's submissions was devoted to the signature issue than the extension of time issue. This is confirmed when regard is had to Capital Finance's written outline of submissions for the appeals/applications. About one page out of nine, or 11%, is concerned with the extension of time issue (excluding the merits issue). 12 Capital Finance was a party to two of the three proceedings in this Court, namely VID 255/2016 (relating to annulment) and VID 256/2016 (in which Ms Cheung applied for an extension of time and leave to appeal). In circumstances where these proceedings were heard together, I think it is preferable to deal with the costs of both proceedings together, rather than making separate costs orders. Dealing with the matters together, Ms Cheung was successful in respect of the issue that occupied significantly more time. I note that Ms Cheung represented herself and therefore did not incur legal costs for representation at the hearing. She is not entitled to costs in this respect. Ms Cheung indicated that she had obtained legal advice and other assistance and sought a costs order to cover such matters. It is not clear whether, if any such costs have been incurred, they are sufficiently related to the proceedings in this Court to be recoverable. However, I think this is a matter to be determined either by agreement between the parties or on a taxation. I will proceed on the basis that Ms Cheung may have incurred some legal costs in connection with the proceedings in this Court which may be recoverable if there were to be a costs order in her favour. However, I also note that any such costs would be relatively modest given that she represented herself at the hearing. 13 In light of the matters referred to above, I consider it appropriate for there to be a costs order in favour of Ms Cheung, but discounting this to a small extent to take into account her lack of success on the extension of time issue. I think an appropriate discount is 20%. Accordingly, I will make an order that Capital Finance pay 80% of Ms Cheung's costs (if any) in relation to proceedings VID 255/2016 and VID 256/2016. 14 I turn now to the Trustees' costs of the proceedings in this Court. The Trustees were necessary parties to the proceedings in which the signature issue arose. They were also necessary parties in relation to the extension of time issue. Given the success of Ms Cheung on the signature issue and the success of Capital Finance (and the Trustees) on the extension of time issue, I consider it appropriate for each of Ms Cheung and Capital Finance to be responsible for 50% of the Trustees' costs of the proceedings in this Court. I will make orders to this effect in proceedings VID 255/2016 and VID 256/2016. I will make no order as to costs in relation to proceeding VID 257/2016 on the basis that no additional costs of any substance arose in relation to that proceeding in this Court. 15 In relation to the costs in the Federal Circuit Court, as I am setting aside the orders made in the Annulment Proceeding and the Directions Proceeding, it is appropriate that I make costs orders in lieu of the costs orders that have been set aside. I note that in the case of proceeding MLG 1701 of 2010, as the applications in this Court have been unsuccessful, the orders made by the primary judge in that proceeding stand. These orders (as amended) included orders that Ms Cheung pay the Trustees' costs and Capital Finance's costs. 16 In relation to the Annulment Proceeding, my assessment is that the time and expense associated with the signature issue and the extension of time issue were roughly the same in relation to the hearing of the preliminary questions below. Accordingly, I consider it appropriate that there be no order as to costs as between Capital Finance and Ms Cheung in relation to the costs of and incidental to the hearing before the Federal Circuit Court. This will include the costs associated with that hearing, including the costs of the affidavits, the submissions and preparation for the hearing. In relation to the Trustees' costs of and incidental to the hearing before the Federal Circuit Court, for the same reasons as given earlier in relation to the proceedings in this Court, I consider that Ms Cheung and Capital Finance should each bear responsibility for 50% of these costs. Otherwise, the costs of the Annulment Proceeding should be reserved. 17 In relation to the Directions Proceeding, I will order that there be no order as to costs in relation to the costs of and incidental to the hearing before the Federal Circuit Court, on the basis that no additional costs of any substance arose in relation to that proceeding in connection with the hearing. I will otherwise reserve the costs of that proceeding. 18 I will give the parties the opportunity to be heard on the precise form of the orders to give effect to these reasons. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.