Cheung v Burness

1. The application filed 18 September 2017 for an extension of time to appeal the orders of the Federal Circuit Court of Australia pronounced on 31 May 2017 in proceeding number (P) MLG 1426/2014 and proceeding number (P) MLG 881/2014 be dismissed.
2. Pursuant to Rule 1.32 of the Federal Court Rules 2011, the application for an extension of time be treated as the filing of an appeal from the orders of the Federal Circuit Court of Australia pronounced on 4 September 2017 in proceeding number (P) MLG 1426/2014 and proceeding number (P) MLG 881/2014.
3. The appeal be dismissed.
4. The applicant pay the costs of the respondents, such costs to be taxed in default of agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

DAVIES J: 1 The applicant ("Ms Cheung") has applied for an extension of time in which to appeal orders made by the Federal Circuit Court ("FCC") on 31 May 2017 dismissing her application for annulment of her bankruptcy, declaring that the property owned by Ms Cheung at Unit 901, 8 Waterview Walk, Docklands ("the property") had vested in the trustees of her bankrupt estate and that the trustees were authorised to sell the property. Ms Cheung has also applied for an extension of time to appeal related costs orders made against her on 4 September 2017 but an extension of time is not required in which to appeal those orders. 2 Ms Cheung's bankruptcy has a long history, which is set out in detail in the judgment appealed from (Burness and Jess as Trustees of the Bankrupt Estate of KT Cheung v Cheung [2017] FCCA 1098) and also in the judgment of Moshinsky J in Cheung v Burness (Trustee) [2016] FCA 1381. In short, a sequestration order was made against the estate of Ms Cheung on a petition of the second respondent ("Capital") on 17 February 2011. The petition relied upon Ms Cheung's failure to comply with a bankruptcy notice founded on a default judgment that Capital obtained against Ms Cheung in the Magistrates' Court of Victoria on 24 September 2010 on a debt claim based on a guarantee. In 2013, Ms Cheung brought an application for a re-hearing in the Magistrates' Court which was refused in February 2014. In July 2014 Ms Cheung filed an application in the FCC for annulment of her bankruptcy. That application was made more than three years after she was bankrupted and two months after the trustees had commenced proceedings in the FCC seeking directions in relation to taking possession of the property. In February 2015 Ms Cheung also filed an application in the FCC seeking an extension of time to review the sequestration order made against her in 2011. The FCC heard the two applications together. In support of both her applications, Ms Cheung argued that she had not signed the guarantee and that her signature had been forged. The FCC found on the evidence that Ms Cheung had signed the guarantee and the debt was owing. The FCC: (a) dismissed her application for an extension of time in which to review the sequestration order; (b) dismissed her annulment application; and (c) ordered that she deliver up to the trustees vacant possession of the property and made related ancillary orders: Capital Finance Australia Ltd v Cheung [2016] FCCA 352. 3 Ms Cheung successfully appealed the orders dismissing the annulment application and for possession and sale. In Cheung v Burness (Trustee), Moshinsky J held that the FCC, having gone behind the Magistrates' Court judgment to determine whether any debt was actually owed by Ms Cheung, had erred in law by proceeding on the basis that it was for Ms Cheung to establish that her signature had been forged, not for Capital to establish that the debt was owed. His Honour, after also concluding that the FCC's finding that Ms Cheung had signed the guarantee involved factual error, reconsidered the evidence and determined that the evidence did not establish that Ms Cheung had signed the guarantee. His Honour accordingly set aside the order dismissing the annulment application and the order for possession and sale and remitted both matters to the FCC: see too Cheung v Burness (Trustee) (No 2) [2016] FCA 1462. Both applications were reheard by Judge Kelly on 6 March 2017 and judgment was delivered on 31 May 2017: Burness and Jess as Trustees v Cheung. Capital did not adduce any further evidence to establish that Ms Cheung had signed the guarantee and, as a result, did not establish that the bankruptcy notice was founded on a debt owed by Ms Cheung. Judge Kelly accordingly held that a sequestration order ought not to have been made against Ms Cheung. His Honour nonetheless dismissed the annulment application on discretionary grounds. 4 Section 153B of the Bankruptcy Act 1966 (Cth) relevantly provides: (1) If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy. (2) In the case of a debtor's petition, the order may be made whether or not the bankrupt was insolvent when the petition was presented. … 5 It is well settled that the power conferred on the Court by s 153B(1) is discretionary in nature. Even if persuaded that the sequestration order ought not to have been made, the Court can, in appropriate circumstances, decline to annul the bankruptcy: Boles v Official Trustee in Bankruptcy (2001) 183 ALR 239. The onus is upon the bankrupt to satisfy the Court that the power should be exercised: Hacker v Weston [2015] FCA 363 at [18]; Shaw v Yarranova Pty Ltd [2016] FCA 88 at [6]. In Bulic v Commonwealth Bank of Australia Ltd [2007] FCA 307 at [12] (in a passage approved by the Full Court in Francis v Egglestone Mitchell Lawyers Pty Ltd [2014] FCAFC 18 at [16]), Tracey J summarised the principles applicable to the exercise of the power conferred by s 153B, which included that: (a) An order can be made under s 153B notwithstanding that the applicant has been discharged from bankruptcy. (b) An applicant who seeks annulment "carries a heavy burden". It is incumbent upon an applicant "to place before the Court all relevant material with respect to his or her financial affairs so that the Court may be properly informed and may make a judgment that is based on the actual circumstances of the applicant". (c) Considerations which may have a bearing on the exercise of discretion include unexplained delay in the making of the application, whether or not the applicant is solvent, whether or not the applicant has made full disclosure of his or her financial affairs and the failure by the bankrupt to oppose the creditor's petition and attend the hearing at which the sequestration order was made: Re Williams (1968) 13 FLR 10 at 24-5; Boles v Official Trustee at 247; Re Papps; ex parte Tapp (1997) 78 FCR 524 at 531; Rigg v Baker [2006] FCAFC 179 at [79]; Cottrell v Wilcox [2002] FCA 1115 at [7]. 6 Other matters relevant to the exercise of the Court's discretion include the conduct of the bankrupt (Marek v Tregenza (1963) 109 CLR 1; Ozer v Australian Liquor Marketers Pty Ltd [2001] FCA 1197 at [29]-[34]) and whether the annulment is for the benefit of creditors and "will be conducive or detrimental to commercial morality and to the interests of the public": Re Lawson (1939) 11 ABC 137 at 139. 7 These principles were referred to by the primary judge at [130]-[137]. 8 The primary judge's reasons for dismissing Ms Cheung's application for annulment on discretionary grounds included the following: (a) The lengthy and unexplained delay in bringing the application: [139]-[143]. At [141] the primary judge noted that since 2011 Ms Cheung was invited on several occasions by the trustees to make an application to set aside the sequestration order or to seek an annulment, including at a time when she had legal representation. In his Honour's opinion Ms Cheung's long and unexplained delay was compounded by her discharge from bankruptcy and the release upon creditors whose otherwise valid claims are now barred: [196]; (b) Ms Cheung made no attempt to establish her solvency whether at the time of presentation of the creditor's petition, during the course of the administration of the estate or for the purposes of her application for annulment. His Honour further noted that such evidence as was adduced pointed in favour of the conclusion that Ms Cheung's estate is now insolvent. That evidence was furnished by the trustees which the Court considered provided a "firm foundation for the conclusion" that she is insolvent. The primary judge also noted that in consequence of the delay in bringing the application there has been an erosion of the bankrupt's estate and the identification of further creditors: [144]-[160]; (c) a lack of candour on the part of Ms Cheung was indicated by Ms Cheung's failure to make full disclosure of her financial affairs and her failure to provide assistance to the trustees: [161]-[164]; (d) Ms Cheung's unexplained failure to attend and oppose the creditor's petition, noting at [166] that Moshinsky J in Cheung v Burness (Trustee) had found that Ms Cheung was served with the creditor's petition: [165]-[170]; (e) the lack of offer or proposal of any arrangement concerning the costs of the petitioning creditor or the trustees but "[t]o the contrary, her attitude was to reject any liability for costs at any stage": [171]-[173]; and (f) Ms Cheung's conduct during the administration of her estate, and her failure to file a statement of affairs for more than two years after the sequestration order was made which hampered the trustees in their ability to assess the financial position of the bankrupt estate: [184]-[185]. 9 Ms Cheung, who represents herself, did not prepare a proposed notice of appeal but she did provide to the Court written submissions setting out the matters upon which she relies in support of her proposed appeal and also filed an affidavit in support explaining the delay between the decision of the FCC in May 2017 and bringing her application in September 2017. The explanation given was that during this period she had other legal disputes in various jurisdictions and her involvement in those proceedings hampered her ability to prepare for and act in the Federal Court proceedings. 10 I do not accept that Ms Cheung has provided a reasonable explanation for the delay in seeking to appeal the orders of Judge Kelly made on 31 May 2017. The fact that Ms Cheung has been involved in other proceedings is not a justification for not commencing her appeal within the prescribed time limits, nor is it a justification in itself that she is self-represented. Time limits prescribed by the Court Rules are not to be ignored to suit the convenience of a party: Hunter Valley Developments Pty Ltd v Minister for Home Affairs and Environment (1984) 3 FCR 344 at 348; Parker v The Queen [2002] FCAFC 133 at [6]. As Derrington J in BLD16 v Minister for Immigration and Border Protection [2017] FCA 1400 stated at [3]: … the time limits prescribed by the Court Rules are not mere aspirational guidelines. They are intended to mark out the period in which it is expected that any appeal might be lodged. Once that period expires without any appeal being lodged the parties are entitled to assume that the litigation is at an end and that they may move on with their affairs as defined by the judgment at first instance. The court should not readily disturb that established state of affairs. The authorities make it clear that applications for an extension of time are not to be granted unless it is proper to do so. The Court must be satisfied that it is fair and equitable in the circumstances to extend time and in that regard the failure to provide an acceptable explanation for the delay is a matter bearing upon whether the extension should be granted. In the present case, the lack of an acceptable explanation provided by Ms Cheung is cogent reason for refusing the extension of time, given the lengthy delay. 11 The prospects of success of an appeal is also a matter to be considered when deciding whether to grant an extension of time to commence an appeal as no purpose is served by granting an extension of time to lodge an appeal which must fail. For the reasons that follow I am not satisfied that any proposed appeal has any reasonable prospects of success. 12 As the decision to be appealed involved the exercise of a discretion, Ms Cheung must therefore show an error in the exercise of the discretion of the type described in House v R (1936) 55 CLR 499. In that case the majority explained that it is not enough that the appellate court be persuaded that it would, or might, have made a different decision than the primary judge, but the applicant must show that the primary judge acted upon a wrong principle, allowed extraneous or irrelevant matters to guide or affect him or her, mistook the facts, or did not take into account some material consideration. It is only if there is error in the decision making process that the Court can set aside the discretionary decision. It is not enough that the Court may consider that, if it were exercising the discretion itself, that it would exercise it in favour of Ms Cheung. 13 As noted, Ms Cheung did not file a proposed notice of appeal but, in accordance with orders made by the Court, instead filed written submissions. In both her written and oral submissions Ms Cheung put forward a number of matters as relevant to her appeal. Her written and oral submissions were not easy to follow, but as best as can be made out from those submissions, her claims included that: (a) the sequestration order was wrongly made against her as her signature was forged on the guarantee; (b) she was not served with the creditor's petition; (c) the trustees repeatedly refused her requests for funding to enable her to bring her annulment application; (d) the trustees failed properly to investigate whether she had signed the guarantee; (e) the trustees failed to consider and act in her interests in the administration of her estate; (f) the trustees did not act in good faith in the administration of her estate; (g) the trustees applied economic and legal duress by refusing legal avenues and funds to pressure her into complying with unlawful claims; and (h) she is solvent. 14 Ms Cheung's submissions were essentially a re-agitation of the merits of the exercise of discretion by the primary judge without identifying any appealable error of the kind described in House v R. As stated, it is not the role of the Court on appeal to re-exercise the discretion. Many of the matters raised by Ms Cheung were addressed by the primary judge in the reasons for decision and a consideration of those reasons does not disclose any error in the exercise of discretion by the primary judge under s 153B. The primary judge correctly identified and applied the relevant principles and gave careful and detailed reasons for exercising the discretion adversely to Ms Cheung. All of the matters considered by the primary judge were relevant considerations bearing upon the exercise of the discretion and it was plainly open to the primary judge to conclude for the reasons given that Ms Cheung had not discharged the burden upon her to satisfy the Court that her bankruptcy should be annulled. 15 Most importantly, although Ms Cheung asserted that she is solvent, nothing appears in the material to indicate that she has any basis for that assertion. The primary judge correctly stated at [145] that insolvency is of central concern in an annulment application and proof of solvency lies on the bankrupt upon the application for annulment. The approach of the primary judge on the issue of solvency discloses no error of principle or fact. 16 As Ms Cheung has not demonstrated any appealable error by the primary judge in dismissing the annulment application, there is no warrant for setting aside the possession and sale orders nor any warrant for setting aside the costs orders subsequently made against her. 17 For completeness I note that Ms Cheung claimed that there is a constitutional issue but the nature of the asserted constitutional issue is not apparent and nothing in the material indicates that any constitutional issue arises. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies.