Burness and Jess As Trustees of the Bankrupt Estate of KT Cheung v Cheung (No.2); and; Cheung v Burness and Jess As Trustees of the Bankrupt Estate of KT Cheung and Anor (No.2)
[2017] FCCA 2115
•4 September 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BURNESS AND JESS AS TRUSTEES OF THE BANKRUPT ESTATE OF KT CHEUNG v CHEUNG (No.2) AND CHEUNG v BURNESS AND JESS AS TRUSTEES OF THE BANKRUPT ESTATE OF KT CHEUNG & ANOR (No.2) | [2017] FCCA 2115 |
| Catchwords: BANKRUPTCY – COSTS – Proceedings remitted by Federal Court of Australia to Federal Circuit Court of Australia – series of costs orders made in Federal Court of Australia – other orders reserving costs in Federal Circuit Court of Australia not disturbed – annulment refused – trustees authorised to sell property – protracted opposition to applications – determination of liability for costs. |
| Legislation: Bankruptcy Act 1966, ss.19, 32, 149 Federal Circuit Court of Australia Act 1999, s.79 |
| Cases cited: AMF15 v Minister for Immigration and Border Protection (2016) 241 FCR 30 Cheung v Burness (Trustee) [2016] FCA 1381 Cheung v Burness (Trustee) (No.2) [2016] FCA 1462 Text cited: |
Applicant: | PAUL ANDREW BURNESS AND MATTHEW JAMES JESS AS TRUSTEES OF THE BANKRUPT ESTATE OF KT CHEUNG |
| Respondent: | KT CHEUNG |
| File Number: | MLG 881 of 2014 |
| Applicant: | KT CHEUNG |
| First Respondent: | PAUL ANDREW BURNESS AND MATTHEW JAMES JESS AS TRUSTEES OF THE BANKRUPT ESTATE OF KT CHEUNG |
| Second Respondent: | CAPITAL FINANCE AUSTRALIA LTD |
| File Number: | MLG 1426 of 2014 |
| Judgment of: | Judge A Kelly |
| Hearing date: | 27 June 2017 |
| Date of Last Submission: | 27 June 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 4 September 2017 |
REPRESENTATION
| Counsel for the Applicant in proceeding MLG 881/2014 and counsel for the First Respondent in proceeding MLG 1426/2014: | Mr Waldren |
| Solicitors for the Applicant in proceeding MLG 881/2014 and counsel for the First Respondent in proceeding MLG 1426/2014: | Hutchinson Legal |
| Respondent in proceeding MLG 881/2014 and Applicant in proceeding MLG 1426/2014: | In person |
| Counsel for the Second Respondent in proceeding MLG 1426/2014: | Mr Carew |
| Solicitors for the Second Respondent in proceeding MLG 1426/2014: | Kemp Strang |
IN EACH OF PROCEEDING MLG 881 OF 2014 AND MLG 1426 of 2014
THE COURT ORDERS THAT:
Subject to paragraph 2 below, the Trustees’ costs of and incidental to their application for directions filed on 12 May 2014 up to 6 March 2016, including reserved costs, be costs in the administration of the bankrupt estate of KT Cheung.
Ms KT Cheung pay the Trustees, in respect of costs incurred after 6 March 2016, their costs of and incidental to their application for directions filed on 12 May 2014, including reserved costs.
Ms KT Cheung pay the Trustees, their costs of and incidental to Ms Cheung’s application for annulment of her bankruptcy filed on 7 July 2014, including reserved costs.
Ms KT Cheung pay Capital Finance Australia Ltd its costs of and incidental to the application for annulment of the bankruptcy filed on 7 July 2014, including reserved costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 881 of 2014
| PAUL ANDREW BURNESS AND MATTHEW JAMES JESS AS TRUSTEES OF THE BANKRUPT ESTATE OF KT CHEUNG |
Applicant
And
| KT CHEUNG |
Respondent
MLG 1426 of 2014
| KT CHEUNG |
Applicant
And
| PAUL ANDREW BURNESS AND MATTHEW JAMES JESS AS TRUSTEES OF THE BANKRUPT ESTATE OF KT CHEUNG |
First Respondent
| CAPITAL FINANCE AUSTRALIA LTD |
Second Respondent
REASONS FOR JUDGMENT
On 31 May 2017, reasons for judgment were published in these proceedings with respect to Ms KT Cheung’s application for annulment of her bankruptcy together with an application for directions made by the Trustees of Ms Cheung’s bankrupt estate.
Orders were made on that date dismissing the application for annulment of the bankruptcy together with orders authorising the Trustees to sell a property situate at 8 Waterview Walk, Docklands. In each of those applications, I made further orders and directions that the parties file submissions respecting the question of costs. As events occurred, Ms Cheung requested an extension of time within which to file submissions. This extension was granted, as was a request to change the hearing date on which the parties were afforded an opportunity to make submissions on the question of costs.
These reasons concern the question of costs in relation to those applications, including the costs of the proceedings that have not been addressed by other orders made in this Court or by the Federal Court of Australia. They should be read in conjunction with the reasons published on 31 May 2017: Burness & Jess (Trustee) v Cheung; Cheung v Burness & Jess (Trustee) [2017] FCCA 1098 (First Reasons). Terms defined in those reasons are adopted in these reasons.
Each of the Trustees and Capital made submissions by which they sought various orders for costs. Ms Cheung opposed the making of orders for costs against her. Ms Cheung’s submissions in relation to costs – written and oral – were largely repetitive of submissions that she had made in relation to her Annulment application and as concerned the Trustees’ application.
By way of overview, on 17 February 2011, Capital presented a creditor’s petition before the then Federal Magistrates Court of Australia for the making of a sequestration order against the estate of Ms Cheung. The sequestration order was made.
Some years thereafter, on 12 May 2014, the Trustees filed the Trustees’ application in which they sought orders authorising the sale of the Docklands Property. As noted in the First Reasons, the Trustees’ application was only filed following a prolonged period of communications between Ms Cheung (and/or her various lawyers) and the Trustees. The application was issued because the Trustees and Ms Cheung had reached an impasse concerning the Docklands property. On 16 July 2014, Ms Cheung filed an application for an annulment of her bankruptcy and on 2 January 2015, Ms Cheung filed an application for an extension of time in which to set aside the sequestration order.
In the period up to December 2015, the parties’ applications were the subject of several directions hearings. At many of those directions hearings, orders were made reserving the parties’ costs.
On 3 March 2016, orders were made in this Court dismissing each of Ms Cheung’s applications and granting the Trustees the directions that they sought. Various costs orders were made. Ms Cheung applied for leave to appeal, or appealed from, several of those respective orders.
On 21 November 2016, orders were made in the Federal Court of Australia dismissing Ms Cheung’s Extension of Time Application and remitting to this Court both her Annulment application and the Trustee’s application: Cheung v Burness (Trustee) [2016] FCA 1381.
On 2 December 2016, orders were made in the Federal Court of Australia addressing various questions of costs. In reasons for judgment given on that date, Moshinsky J considered how issues of costs should be resolved in the proceedings before him and, consequentially, in this Court: Cheung v Burness (Trustee) (No 2) [2016] FCA 1462. It is necessary to examine the reasons of His Honour as to costs both in the Federal Court of Australia and as concerned various costs orders that had been made in this Court.
As to costs of the Federal Court proceedings, Moshinsky J reasoned:
(a)as to the Extension of Time and the Annulment applications, that it was preferable for all of those costs be dealt with together and that Capital should pay Ms Cheung 80% of her costs, if any, recoverable as a self-represented litigant;
(b)as to the Trustees’ costs, that the Trustees were necessary parties to each of the Extension of Time and the Annulment applications. Orders were made that Capital and Ms Cheung each pay 50% of the Trustee’s costs in each of those Federal Court applications;
(c)as to the Trustees’ application, that no order for costs should be made in relation to Ms Cheung’s appeal from the orders made on this application to the Federal Court (on the basis that no additional costs of any substance arose in that application).
As to costs incurred in the Federal Circuit Court of Australia, Moshinsky J concluded that it was appropriate to address the costs incurred in this Court upon each of the applications for an Extension of Time, Annulment and Directions respectively. In relation to the parties’ costs in those applications, Moshinsky J held as follows:
(a)Extension of Time application: the costs orders (as amended), made against Ms Cheung in favour of Capital and the Trustees respectively should not be disturbed;
(b)Ms Cheung and Capital: it was appropriate for there be no order for costs as between Capital and Ms Cheung. In so holding, Moshinsky J made plain that there should be no such costs orders of either party of or incidental to the hearing in the Federal Circuit Court including the costs of affidavits, submissions or preparation for the hearing;
(c)Trustees: Ms Cheung and Capital should each bear responsibility for 50% of the Trustees’ costs of and incidental to the hearing of the Annulment application in the Federal Circuit Court;
(d)Annulment application: the Trustees’ costs of and incidental to this application in this Court should otherwise be reserved;
(e)Trustees’ application: there should be no order for costs of or incidental to the hearing in December 2015 of the Trustees’ application in this Court on the basis that His Honour concluded there were no additional costs of any substance in connection with that hearing. Otherwise, Moshinsky J ordered that the costs of this application also be reserved.
See [2016] FCA 1462, at [15]-[17].
Further to the above, there are the costs of and incidental to the hearing before me of the applications that were remitted by Moshinsky J to this Court. Those applications were Ms Cheung’s Annulment application and the Trustees’ application.
As concerns extant costs issues in relation to the present applications, I agree in the submissions of the Trustees and Capital that, save for the costs of and incidental to the hearing in December 2015, the costs of:
(a)the Annulment application remain undetermined;
(b)the Trustees’ application remain undetermined.
Part III of the Bankruptcy Act 1966 (Cth) concerns the subject, Courts, and addresses both the jurisdiction and powers of Courts in bankruptcy. By s 32 of that Act, the Court may in any proceeding before it make such orders as to costs as it thinks fit (see also sub-s 79(2), Federal Circuit Court of Australia Act1999 (Cth)). Both Ms Cheung’s Annulment application and the Trustees’ application are proceedings of a kind falling within s 32.
Although the discretion conferred by s 32 is unfettered, it must be exercised judicially. Equally, there is no reason to imply any general limitation on the wide language of s 32: Bent v Gough (1992) 36 FCR 204, 206-207 (Black CJ), 215-216 (Northrop & Ryan JJ).
The general rule in civil proceedings is that costs follow the event. In the present case, nothing has been submitted to me why that general rule ought not apply in the exercise of the discretion conferred by s 32. I accept the submission of Capital that no such reason is shown. As held in the First Reasons, Ms Cheung’s Annulment application has been dismissed. Further, I have also held that the Trustees are entitled to the relief as sought by the Trustees’ application.
I consider it is appropriate to adopt the approach taken by Moshinsky J in dealing with both applications together: see [2016] FCA 1462, [12]. To adapt the commentary of G E Dal Pont, in The Law of Costs, 3rd Ed, (2013) at [11.64], I consider it to be in the interests of justice to make a global order for costs in relation to both the Annulment application and the Trustees’ application. Following the remittal of the applications to this Court, on 15 February 2017 orders were made with respect to the preparation of those matters for final hearing. It was agreed that evidence in one application be evidence in the other. As a consequence much of the detailed evidence prepared by the Trustees for the Trustees’ application was relevant to and relied upon in relation to Ms Cheung’s Annulment application. I determine the applications for costs as follows:
Annulment application: I agree in submissions of Capital that it advanced no further evidence or submission as to the proof of Ms Cheung’s signature upon the guarantee. Thus, the substantive issues that remained for determination in this application concerned identification and evaluation of the discretionary factors that militated in favour, or against the granting, of an annulment of the bankruptcy.
Ms Cheung’s Annulment application was dismissed. Costs should follow the event of that dismissal. Each of Capital and the Trustees are entitled to an order that Ms Cheung pay the costs of and incidental to this application. They are not costs of the bankruptcy. As noted in the First Reasons at [178], on 6 March 2016, Ms Cheung was discharged from her bankruptcy: see sub-s 149(4) of the Act.
Insofar as orders have been made in relation to that Annulment application reserving the costs of particular directions hearings, Capital and the Trustees are entitled to those reserved costs. I decline to otherwise order that such reserved costs should not follow the event: cf r 21.04, Federal Circuit Court Rules 2001.
Trustees’ application: The Trustees were successful in their application. They succeeded in the face of persistent opposition from Ms Cheung. Again, I consider that costs ought to follow the event. The First Reasons traced in some detail the circumstances leading up to the initiation of that application. The Trustees were justified in commencing that application. They have incurred substantial costs in doing so. The evidence which they prepared and the submissions that were made supported the conclusion that they were entitled to the directions sought. I agree in the Trustees’ submission that, had the matter proceeded in an orderly manner, it was entirely possible and appropriate for it to have been resolved or determined in 2014. It was not on account of any conduct by the Trustees or Capital that this application was so protracted.
Only Ms Cheung was joined as a party to this application. As such I conclude that Capital ought be allowed no costs respecting it.
Following the applications in the Federal Court of Australia, Moshinsky J determined that the Trustees not be entitled to costs of or incidental to the Trustees’ application incurred with respect to the hearing before Burchardt J in December 2015. The reasons why that was so were explained at [11(c)] and [12(e)] above.
I do not exercise the discretion with respect to costs of this application through the prism of events that may have existed in 2011. I consider that since that year the Trustees acted with restraint and afforded Ms Cheung several opportunities to advance whatever application she thought fit to seek redress in relation to the sequestration order.
I agree in the Trustees’ submission that Ms Cheung has not advanced a sufficient basis upon which she opposed the directions that were sought by the Trustees. Granted, Ms Cheung put in issue the authenticity of her signature on the guarantee. However, Ms Cheung failed in her Annulment application and the bankruptcy of her estate stands. The Trustees were and are subject to statutory obligations with respect to the administration of the bankrupt estate. It was incumbent upon the Trustee to institute the Trustees’ application and pursue the claim to relief that was ultimately granted: see para’s 19(1)(f), (j), (k) of the Act.
However, I do not accept the Trustees’ submission that the consequences of Ms Cheung having delayed in the making of her Annulment application ought to be visited upon Capital. It was through no fault of Capital that Ms Cheung delayed in the making of that application. Quite arguably, the delay operated to the prejudice of Capital inasmuch as it may have made more difficult the proof of the authenticity of the signature upon the guarantee. In contradistinction to the position initially adopted by the Trustees in their written submission (namely, that Capital ought to bear a proportion of its costs), the Trustees’ oral submission was that the reason the annulment had not been granted was due solely to the conduct of Ms Cheung.
I decline to make an order that would apportion liability for the Trustees’ costs as between Ms Cheung and Capital.
Though I also accept that latitude must be shown to self-represented parties, as the First Reasons indicate, Ms Cheung had, and exercised, access to legal advice over a significant period of time. And I do not ignore that where the interests of self-represented litigants must be considered, it remains necessary to be fair to all parties: Hamod v New South Wales [2011] NSWCA 375, [309]-[310] (Beazley JA, Giles and Whealy JJA agreeing); AMF15 v Minister for Immigration and Border Protection (2016) 241 FCR 30, [37]-[42] (Flick, Griffiths and Perry JJ). As pointed out in the course of the hearing in relation to costs since 2014, the Court secured the assistance for Ms Cheung of a leading Queens Counsel with specialist knowledge in commercial law and ordered mediation. As was also pointed out, one of the reasons why orders were made for the service of affidavits and the filing of submissions in advance of the hearing was to enable all parties to know precisely where they stood in relation to the issues to be raised with respect to the Annulment and Trustees’ applications.
An order should be made that Ms Cheung pay the costs of and incidental to the Trustees’ application. For the avoidance of doubt, I decline to otherwise order that such costs as were reserved in the course of that application should not follow the event.
I note that the Trustees expressly reserved, but do not press any application for costs of the administration of the estate. Instead the Trustees submitted that the costs in the Trustees’ application ought to be costs in the bankruptcy up to 6 March 2016 (being the date on which orders were made by Burchardt J). I accept that submission. A consequence of acceding to that submission is that the Trustees’ costs of and incidental to the Trustees’ application up to 6 March 2016 should be costs in the bankruptcy.
The Trustees further submit that since that date Ms Cheung has acted on the basis that she was an undischarged bankrupt (which she is). As referred to above (and quite coincidentally with the making of the orders of Burchardt J on that date), by operation of sub-s 149(4) of the Act, Ms Cheung was discharged from her bankruptcy on 6 March 2016. This circumstance may reinforce the conclusion that it is appropriate for costs to follow the events that have occurred.
I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Judge A Kelly
Associate:
Date: 4 September 2017
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