Capital Finance Australia Ltd; v Cheung and Burness and Anor As Trustees v Cheung and Cheung; v Burness and Anor As Trustees and Anor
[2016] FCCA 352
•3 March 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CAPITAL FINANCE AUSTRALIA LTD v CHEUNG and BURNESS & ANOR AS TRUSTEES v CHEUNG and CHEUNG v BURNESS & ANOR AS TRUSTEES & ANOR | [2016] FCCA 352 |
| Catchwords: BANKRUPTCY – Application for extension of time to review decision of a Registrar to make a Sequestration Order – order made in February 2011 based on Magistrates Court judgment in 2010 – bankrupt asserting judgment based on fraudulent documentation – whether bankrupt aware of Magistrates Court proceeding – whether bankrupt served with Bankruptcy Notice and/or Creditor’s Petition – court concluding that the bankrupt executed the allegedly forged documentation, contrary to her denials – court accepting bankrupt fully aware of Bankruptcy Notice and Petition – delay not at all adequately explained – prospects of success if time extended minimal – application for extension of time dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), s.153B Limitations of Action Act 1958 (Cth) |
| Hunter Valley Developments v Cohen (1984) 3 FCA 176 |
| Applicant: | CAPITAL FINANCE AUSTRALIA LIMITED ACN 069 663 136 |
| Respondent: | KT CHEUNG |
| File Number | MLG 1701 of 2010 |
| Applicant: | PAUL ANDREW BURNESS AND MATTHEW JAMES JESS AS TRUSTEE OF THE BANKRUPT ESTATE OF KT CHEUNG VIC 550 OF 2011/1 |
| 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 VIC 550 OF 2011/1 |
| Second Respondent: | CAPITAL FINANCE AUSTRALIA LIMITED |
| File Number | MLG 1426 of 2014 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 1, 2 & 4 December 2015 |
| Date of Last Submission: | 4 December 2015 |
| Delivered at: | Melbourne |
| Delivered on: | 3 March 2016 |
REPRESENTATION
| Counsel for Capital Finance Australia Limited: | Mr Carew |
| Solicitors for Capital Finance Australia Limited: | Kemp Strang |
| Counsel for the Trustees: | Mr Waldren |
| Solicitors for the Trustees: | Hutchinson Legal |
| KT Cheung: | In person |
ORDERS
Ms Cheung’s Application for an Extension of Time in which to bring her Application to Review the decision of Registrar Burns
on 17 January 2011 to make a Sequestration Order against the estate
of Ms Cheung be refused.
The Application in a Case filed by Ms Cheung on 23 January 2015
be dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1701 of 2010
| Applicant: | CAPITAL FINANCE AUSTRALIA LIMITED ACN 069 663 136 |
And
| Respondent: | KT CHEUNG |
MLG 881 of 2014
| Applicant: | PAUL ANDREW BURNESS AND MATTHEW JAMES JESS AS TRUSTEE OF THE BANKRUPT ESTATE OF KT CHEUNG VIC 550 OF 2011/1 |
And
| Respondent: | KT CHEUNG |
MLG 1426 of 2014
| Applicant: | KT CHEUNG |
And
| First Respondent: | PAUL ANDREW BURNESS AND MATTHEW JAMES JESS AS TRUSTEES OF THE BANKRUPT ESTATE OF KT CHEUNG VIC 550 OF 2011/1 |
| Second Respondent: | CAPITAL FINANCE AUSTRALIA LIMITED |
REASONS FOR JUDGMENT
Introductory
These are three interrelated matters, all arising from the bankruptcy
of Ms KT Cheung. Ms Cheung was the subject of a Sequestration Order made by Registrar Burns on 17 February 2011 following
a Creditor’s Petition (“the Petition”) filed on 7 October 2010
by Capital Finance Australia Limited (“Capital Finance”).
The Petition was based on a debt proved in the Magistrates Court
of Victoria on 24 September 2010 for an amount in excess of $34,000 and that debt itself arose from a guarantee allegedly executed by
Ms Cheung in 2007.
That proceeding is MLG1701 of 2010.
On 23 January 2015, Ms Cheung filed an Application in a Case which is, effectively, an application to review the decision of Registrar Burns. Although the Application does not state so in terms (Ms Cheung
has been self-represented throughout), it is clear that she requires
an extension of time in which to bring the Application.
The second proceeding in time is MLG 881 of 2014, in which the Trustees of Ms Cheung’s bankrupt estate seek possession of her home at Unit 901, 8 Waterview Walk, Docklands and that it be delivered
up to the Trustees for sale.
The third Application, MLG 1426 of 2014, is an Application by
Ms Cheung to annul her bankruptcy.
These matters were in the docket of Judge Riethmuller, who ordered mediation (unsuccessful) and, ultimately, directed that the matters
be heard together but that a preliminary hearing take place to determine two very significant matters. These are interrelated. They are whether time should be extended to permit Ms Cheung to bring her Application to set aside her bankruptcy and whether, as Ms Cheung strongly asserts, the guarantee from which all this stems, already referred to above,
was in fact a forgery.
Although no formal Order for a split trial in these terms was, so far as
I can see, ever made, it is clear that that is what his Honour directed and all parties proceeded before me on this footing.
For the reasons that follow, I am positively satisfied that the original guarantee was indeed executed by Ms Cheung and was not forged.
I also decline the Application to extend time within which to allow the Application to be brought.
Although Ms Cheung’s submissions traversed a number of areas, it has been clear throughout the proceeding that all parties have proceeded
on the footing that, first, Ms Cheung needs to explain the delay in her Application and, second, needs to address, at least in sufficient terms bearing in mind that this is an interlocutory hearing, the prospects
of success.
It should be noted that the solicitors for Capital Finance helpfully prepared a Court Book of the relevant affidavit material from which all parties worked during the hearing. There has been no suggestion that any material documentation was omitted, save to the extent that further exhibits were tendered during the currency of the proceeding.
Relevant historical matters – the affidavit of Matthew James Jess sworn 12 May 2014
Although Ms Cheung presented her case first, as I was of the view that she was the substantive applicant in real terms, it is appropriate
to commence with the affidavit of Matthew James Jess sworn 12 May 2014, which sets out a number of historical matters of considerable relevance to the extension of time application.
The applicant was made bankrupt by way of the Sequestration Order of Registrar Burns on 17 February 2011 and Mr Matthew James Jess and Mr Paul Andrew Burness were appointed as joint and several Trustees of the Bankrupt Estate. It should be noted in passing that the Affidavit of Service of the Petition was sworn by Mr Peter John Lowe, to whom I shall return.
As at 17 February 2011, the applicant was registered as the proprietor of two real estate properties, the first in Notting Hill
in Victoria and the second being the unit in Docklands, where the applicant lives.
On 22 February 2011, Mr Burness wrote to the applicant informing
her of her bankruptcy and requiring production of a Statement
of Affairs (Annexure 3 to the Affidavit of Mr Jess). On 4 March 2011, Messrs Chiodo & Madafferi Solicitors (“Chiodo & Madafferi”) wrote on behalf of the applicant to the Trustees (Annexure 4). It was claimed that Ms Cheung was wholly unaware of any claim, summons or debt which resulted in the bankruptcy and further details were sought.
Inter alia, however, the letter stated:
“We understand our client is seeking the assistance of an accountant to complete the statement of affairs and will be in attendance as required for the interview on Friday 11 March 2011.”
From Mr Jess’s affidavit (paragraph 9) it is apparent that Ms Cheung did indeed attend an interview with members of staff of Worrells
(the firm of which Mr Burness and Mr Jess are Partners). Inter alia, she asserted that she would lodge her Statement of Affairs on 18 March 2011 and disputed signing the guarantee documents which led to the judgment debt and the subsequent Sequestration Order.
On 28 March 2011, Worrells provided Ms Cheung with a copy of the Finance Agreement with BMW Financial Services and the letter
of demand to her from BMW Financial Services dated 1 February 2010. The agreement included a guarantee signed, inter alia, by a person described as “Katie Truong”. On the same date, Worrells further provided Ms Cheung with a copy of the judgment obtained against her by Capital Finance, the Term Purchase Agreement between LWY Holdings Pty Ltd dated 14 July 2004 and the Guarantee and Indemnity between Ms Cheung and Capital Finance dated 19 July 2004.
On 31 May 2011, Mr Burness wrote to Ms Cheung putting her
on notice that, if she did not respond to the letter within 14 days,
he intended to instruct solicitors to enter into transmission of the Notting Hill property and the Docklands property in favour of the bankrupt estate with a view to selling the same.
Importantly, on 31 May 2011 (paragraph 13 of Mr Jess’s affidavit), Chiodo & Madafferi Solicitors wrote to Worrells on behalf
of Ms Cheung (Annexure 9 to the affidavit). The letter relevantly asserts that:
“A search of the company LWY Holdings Pty Ltd, which was undertaken by our client shows that Mr James Wong,
was a director amongst other people, our client had no interest in the said company.
… the signature that appears next to her name is not her handwriting nor is it her signature, nor does she have any knowledge of whom the witness may be and that she has never attended upon Capital Finance for the purpose of guaranteeing the Loan…
Out client has never been in possession of the motor vehicle
as alleged in the Statement of Claim, which was filed in the Magistrates’ Court.
We are in the process of preparing a draft Affidavit which subject to our clients instructions will be completed and filed with the Court in an application to set aside the Bankruptcy.
We understand that we are required to make such an Application and then proceed to the Magistrates Court if successful and make application to have the judgment obtained in the Magistrates Court set aside.”
On 11 July 2011, Mr Burness wrote to Chiodo & Madafferi requiring written confirmation and evidence that Ms Cheung was seeking to set aside the Sequestration Order, but noted that the transmission application would proceed in the event that no such application was made (paragraph 14 of Mr Jess’s affidavit and Annexure 10).
On 12 July 2011, Ms Cheung wrote directly to Worrells (Annexure 11). The letter states:
“… It is my understanding that you (Worrells) have been
in frequent communication with Chiodo & Madafferi Solicitors to come to an agreement to take the matter to the Magistrates court to have the bankruptcy annulled.
I have agreed to put forward my two estates to carry this matter forward. I have however not agreed to cover your costs, as I am neither responsible nor liable for the work that you have carried out to date. I would suggest that you follow up with the reckless parties involved in the unjust and wrongful pursuit of my bankruptcy.”
The letter went on to assert a possible lack of confidence in Chiodo
& Madafferi and a review of their retainer.
Nothing relevantly was further heard by the Trustees, so on 21 October 2011 (paragraph 18 Mr Jess’s affidavit and Annexure 13) the Trustees took transmission of the interest of Ms Cheung in the Notting Hill property. Mr Jess deposes that:
“As the Respondent had yet to file her Statement of Affairs,
I was unable to assess whether realisation of the Second Property was necessary at that time.”
Thereafter, the Notting Hill property was sold at auction
on 10 December 2011 at a price of $457,500 (paragraph 20 of
Mr Jess’s affidavit).
On 6 February 2012, Ms Cheung emailed Worrells (paragraph
21 Mr Jess’s affidavit and Annexure 15). The email complained of the conduct of the Trustees (albeit in rather unspecific terms)
and repeated the assertion that she did not sign the relevant documents which had given rise to her difficulties.
On 7 February 2012, Mr Burness wrote to Ms Cheung with a copy sent to Chiodo & Madafferi which, relevantly for these purposes, indicated that further assets needed to be realised to pay out Ms Cheung’s debts and gave her several options to avoid the sale of the Docklands property and reminded Ms Cheung to file her Statement of Affairs. The letter (pages 32 and 33 of Annexure 16) relevantly asserted
in this regard:
“I also take this opportunity to remind you that I am yet to receive your Statement of Affairs (SOA) document. You should
be advised that I am not permitted to distribute a dividend to your creditors without either approval of the court or until such time as a SOA has been received from you. Following the settlement of the Docklands property (24 February 2012),
I intend to apply to the court for approval to pay a dividend in your bankruptcy. If this course of action is required, it will add further costs to the bankruptcy and in turn reduce the likely surplus that would be returned to you.
I therefore strongly urge you to complete your SOA and return
to me as soon as possible. I have enclosed a blank copy for your convenience. Should you require any assistance in completing the document, please contact Daniel Alcock of my office…”
On 17 February 2012, Ms Cheung attended a second interview with Mr Burness and Mr Matthew Kucianski of Worrells (paragraph 24 Mr Jess’s affidavit). The letter of Mr Burness to Ms Cheung
on 20 February 2012 (Annexure 17) records, inter alia, that:
“…
(iii.) You advised our office that you disputed the validity of the bankruptcy order on a number of potential grounds, including but not limited to: false affidavits being filed in the proceedings, potential fraudulent signing of documents and the non service
of certain court documents. You were advised by the trustee that the onus is on you to bring an application before the court
to have the validity of the order determined, as you will appreciate you have provided no evidence to this office of those matters;
…
(v.) You were advised that time is of the essence if you are to be making an application to contest the validity of the bankruptcy order;
(vi.) You were made aware that costs in the bankruptcy would continue to accrue until all creditors were paid out in full,
or until such time as the court annuls or sets aside the bankruptcy. You are again made aware therefore that time is
of the essence if you are to be making an application to the court to contest the validity of the bankruptcy order;(vii.) You advised our office that you would be immediately seeking new legal representation, having asked Chiodo
& Madafferi Solicitors to cease acting on your behalf. You noted that our office would hear from your new legal representatives by Tuesday 21 February 2012.”
The applicant sent a reply the same day, disputing the points that were explained or highlighted to her.
Thereafter, the applicant sought release of funds to obtain legal representation and, by a letter to Mr Burness dated 28 February 2012, inter alia, confirmed that her previous name was Katie Truong (Annexure 19).
On 22 March 2012, Mr Burness emailed Ms Cheung (paragraph 28
Mr Jess’s affidavit and Annexure 20) pointing out that he was unable
to consider her request for funds until she furnished a completed Statement of Affairs. The balance of Annexure 20 shows unhelpful responses, in my view, by Ms Cheung to the reasonable request for the provision of the Statement of Affairs.
On 16 April 2012, (paragraph 29 Mr Jess’s affidavit and Annexure 21) Mr Burness wrote to Ms Cheung giving her 28 days to prove that she had filed an application to set aside her bankruptcy and reminding her that he had yet to receive her Statement of Affairs. This led to a further exchange of emails in which the applicant made complaints against
Mr Burness which Mr Burness denies.
On 18 May 2012, the applicant sent a further email to Mr Burness stating that she was in the process of seeking alternate legal representation and that they would be in contact in due course.
Thereafter, on 21 May 2012, Ms Cheung sent an email requesting court documentation regarding her bankruptcy, to which Mr Kucianski
of Worrells replied on 31 May 2012 (paragraph 32 of Mr Jess’s affidavit and Annexure 24). Ms Cheung responded with four further emails, inter alia asserting she had received no paperwork from Worrells and that she wished to report Capital Finance and BMW
for fraud.
Thereafter, Mr Burness followed up with Capital Finance the question of fraud and was advised that the signature on the relevant document appeared to be similar to that of a driver’s licence copy held by Capital Finance. The response from Capital Finance (Annexure 27) relevantly asserts:
“… the first reference to a suggestion of fraud was when our solicitors informed us on 2 June 2011 that M/s Cheung had written to yourselves to advise same. As we did not hear anything further and also that the signature on the guarantee appeared similar to the copy of a driver’s licence we held,
no further investigation took place.
Not until some twelve months later on 4 June 2012 did we have a conversation with M/s Cheung in which she again raised the suggestion of fraud.
On the 4 October 2009 we engaged a mercantile to conduct
a field call to M/s Cheung’s address. The agent proved successful wherein the customer acknowledged the debt and reported as follows “At the time of attendance our agent interviewed a female occupant who identified herself as your debtor. The debtor confirmed her residence at the given address. The debtor advised that she is employed on a full time basis but would not supply further details. The debtor stated that she
is aware of the debt but she refused to enter into a payment plan at this time.”
Although we have not engaged a handwriting expert it is our opinion that the signatures are that of M/s Cheung on the basis that the signatures on the driver’s licence and the guarantee appear to be similar enough not to be questioned and also that no objection had been raised regarding the signatures, despite acknowledgment of the contract in the intervening period, until some seven years after the contract had been signed.”
On 22 August 2012 (paragraph 37 Mr Jess’s affidavit and Annexure 29), Mr Burness wrote to Ms Cheung giving her 21 days to file her application for a review of the Sequestration Order and further requesting that she file a Statement of Affairs. Despite the engagement of solicitors, it took until 5 March 2013 before the applicant signed
her Statement of Affairs (see Annexure 31 at pages 90 and 100).
The Statement of Affairs further annexes, at pages 113-115, a draft affidavit by Ms Cheung “TAKEN BY COSIMO CHIODO ON 25 MAY 2011”. The relevance of this is that it sets out
a basis upon which one might infer that any cars the subject of legal proceedings were owned by her former husband.
Following an inconclusive endeavour to obtain a conclusive handwriting expert’s report (paragraph 44 Mr Jess’s affidavit)
the Trustees decided to admit the claim of Capital Finance in her bankruptcy and advised Ms Cheung that she was entitled to apply
to review that decision to the court (paragraph 45 Mr Jess’s affidavit and Annexure 35).
It is sufficient to say that, despite contact between the parties,
the applicant made no endeavour to set aside the bankruptcy until
23 January 2015, and her annulment application was not lodged until 16 July 2014 (shortly after the application for possession and sale
of the Docklands property was filed on 12 May 2014).
It is appropriate to turn next to the affidavit of Mr Paul Daniel McCarthy.
The affidavit of Paul Daniel McCarthy sworn 6 August 2014
Mr McCarthy is a Solicitor acting for Capital Finance. He swore the affidavit in response to the Application for annulment but the facts contained therein are of relevance.
On 16 December 2013, Ms Cheung issued an Application for
Re-Hearing in the Melbourne Magistrates’ Court of the hearing that had given rise to the original judgment against her. She relied upon
an affidavit (exhibit “PDM-3” to Mr McCarthy’s affidavit). That affidavit relevantly asserts at paragraph 4 that the Guarantee for the lease of a vehicle was for the use of her former husband, James Lai. The affidavit annexed an affidavit of Mr Lai sworn 3 October 2013,
to which I shall return. It also annexed an affidavit from Mr Lai’s business partner, Richard Clinton John King, to the same effect. The affidavit goes on to assert that Ms Cheung was never served with any documents in relation to the Magistrates Court proceeding and that she was not served with the Bankruptcy Notice or Creditors’ Petition prior to the Sequestration Order made against her.
The affidavit, inter alia, asserts various errors in the Guarantee Form and notes that the copy of the driver’s licence relied upon was
a photocopy or faxed copy. I note, inter alia, at paragraph 18
Ms Cheung deposed:
“I lost 11 months time while engaged with Chiodo and Madafferi Solicitors as they were engaged by Mr Lai. The passing
of 11 months significantly hindered my ability to challenge
the Default Judgment.”
The affidavit made it clear that fraud was alleged.
The affidavit annexed by Mr Lai said that he was the former husband of Ms Cheung but that the marriage came to a complete end in 2005. Mr Lai deposed:
“With Regards to the car leases taken out through Capital Finances, and Mercedes I am quite certain that she did not
co-sign the guarantor. I have no reason to believe that she even knew there was a lease taken out in her names. I would also like to assert that KT never had anything to do with the running
of either company that I was a director. I am prepared to stand up in any court again to say what I believe are the facts.”
The affidavit of Mr King is to the like effect.
The affidavit of Mr McCarthy also annexes the affidavit sworn
by Mr Philip Andrew Duxbury in opposition to the Application
for Re-Hearing (exhibit “PDM-4”). Relevantly, the affidavit includes a report from Stoneink Pty Ltd following an interview on 4 October 2009, the contents of which have already been paraphrased earlier in paragraph 33 above. This confirms the fact that, by that date,
Ms Cheung must have been aware of the alleged debt due to Capital Finance.
The Application for the Re-Hearing was heard on 3 February 2014 and the Application was dismissed (annexure “PDM-5” to Mr Duxbury’s affidavit). The affidavit of Mr McCarthy purports to include
a description as to why this Application was unsuccessful but, as it is hearsay (see paragraph 14 of Mr McCarthy’s affidavit), I give that no weight. Nonetheless, it is clear that the court was not moved to set the original judgment aside.
I have set out these matters at what is, admittedly, some laborious length because none of the matters thus asserted are susceptible of any sensible challenge. They show a number of things going to the knowledge that Ms Cheung has had of the Sequestration Order and her opportunities, should she so desire, to set it aside. They show the endeavours she in fact made to improve things by seeking a re‑hearing of the original Magistrates Court decision. They show that this failed. It is, however, at this point appropriate to come to the evidence given during the trial itself and, to the extent necessary, to review the affidavit material filed.
The evidence of Ms Cheung
A substantial objection has been taken to the terms of Ms Cheung’s affidavits. Most of the objections taken, in my view, are clearly correct.
I note that, from the affidavit sworn 15 July 2014 (paragraphs 4 and 5), Ms Cheung initially studied three years of Computer Science
at Monash University, transferred to complete an undergraduate degree majoring in Psychology at Monash and followed this by postgraduate in Psychology and Masters of Psychology (Counselling).
Her employment history included Management at a number of retail stores.
At paragraph 9, Ms Cheung deposed:
“Insofar as these proceedings are concerned to the best
of recollection I received a phone call late in 2009 from somebody. They were asking me about a motor vehicle,
a Mercedes. I told them I did not know anything about any finance or cars. I was driving a small Peugeot. They then asked me if I knew who James was, which I did but I told them he had nothing to do with me as we were separated for sometime since 2004.”
The affidavit goes on to depose to difficulties in receipt of mail at the Docklands address.
At paragraph 12, the affidavit continues:
“The next incident I recall is on 2 February 2011, I was in my secure private car park, it was 8.00 - 8.20 am when a large man approached me and grabbed my car door, I panicked, he then threw some papers at me and said KT Cheung, these are for you. I threw the papers back at him because I did not know what was happening the papers hit the ground and I drove off. I came back a short time later after dropping my child off and the papers were not on the ground and the person had gone. I never read the papers I never saw the papers. I did not know that apparently they were the Bankruptcy papers that were being served on me.”
The affidavit goes on to deny signing any documents to do with her former husband’s companies or otherwise and asserted at paragraph 15 a pattern of fraudulent claims. The affidavit asserted that a variety of parties were involved in fraudulent conduct against her and annexed as Annexure 7 a Deed of Settlement and Release (unexecuted) dated
in 2014 between herself and Mercedes-Benz Financial Services Australia Pty Ltd.
The affidavit went on to assert, as is the fact, that BMW had withdrawn their proof of debt in the bankruptcy.
The affidavit went on to assert that the contract with Capital Finance was void on a number of bases, including that it was faxed, that the forensic analysis conducted by Worrells was inconclusive and that there were no supporting documents or solicitor’s certificate.
The next affidavit sworn by Ms Cheung on 20 January 2015 refers
to a complaint to the Financial Ombudsman and an absence
of documentation.
The next affidavit filed by Ms Cheung on 23 January 2015 asserts
an incapacity to obtain legal representation because of the bankruptcy and the failure of Worrells to release funds. The affidavit is a mixture of legal assertions and criticisms of the original documentation said
to constitute the Guarantee.
The final affidavit relied upon by Ms Cheung affirmed
on 16 November 2015 asserts that the BMW contract was withdrawn and two fraudulent Mercedes contracts were dismissed through
the Financial Ombudsman (paragraph 5). The affidavit asserted that this was part of the pattern which was further exemplified by the contract with Capital Finance. Most of the rest of the affidavit is, frankly, argumentative. I note that Ms Cheung is strongly critical
of the forensic report prepared on behalf of Capital Finance by
Mr Holland and Ms Cheung points to the evidence of Mr Ganas to the opposite effect.
The affidavit also points to an alleged breach of the Limitations
of Action Act 1958 in the original proceeding.
The evidence given by Ms Cheung at Court
Ms Cheung in her evidence-in-chief merely adopted her affidavits
as true and correct. I note that she is unemployed. It should be noted that this recitation of the evidence has been taken from my notes. Transcript has been made available but what I wish to do is to record those aspects of the evidence which struck me as being of particular significance.
Counsel for Capital Finance asked when Ms Cheung first knew that Capital Finance was pursuing her in relation to the debt. She said she could not remember but received a phone call asking about a vehicle. She was confused because it was not hers and she was not driving it. She said then a Private Investigator named Peter confronted her in the Docklands property car park. She denied receiving business cards put by Peter (Mr Lowe) under her door. When it was put to her that
Mr Lowe put cards underneath her door in 2010 she said that she could not remember. Business cards were not important. When it was put to her that she would remember a Process Server leaving a business card, she said that she did not expect a financial debt and would not attend to something that was not her business. I found this evidence given in a fashion that was very unconvincing.
Ms Cheung accepted that she had been told in February 2011 that she was bankrupt by the Trustee and she took the letter from the Trustees to Messrs Chiodo & Madafferi. They acted for her for 11 months.
She had received the letter from Chiodo & Madafferi dated 31 May 2011 sent to Messrs Worrells (Annexure 1 to her affidavit sworn
15 July 2014). Although Ms Cheung professed some incapacity to understand this letter, my impression of her is that she is a highly intelligent woman who well understood what was written. She was forced to concede that the Application foreshadowed on 31 May 2011 was, to all effects and purposes, that that she ultimately made in 2015.
Counsel traversed the identity of the alleged witness to the original Guarantee, a Mr Lazzaro. Ms Cheung denied meeting Mr Lazzaro and said that she would have remembered driving to Berwick to sign
a document twice. She said James Wong referred to in the documentation was an Architect and a friend of her former husband, James Lai.
When challenged with the fact that she had been known by various names for the past decade, she said it was the same name with different spellings, although it became apparent that her name had been styled in at least four ways. Ms Cheung was cross-examined about the two properties she has owned and the mortgages upon them. Although she appeared to deny advance notice of the sale of the Notting Hill property, she did concede that one aspect of the sale involved the payment out to Westpac of the mortgage on the property.
Ms Cheung was taken to the letter from Worrells to Chiodo & Madafferi dated 14 July 2011. Ms Cheung said she was unable to say that she had received it and said, “I’ll say no.” Nonetheless, when
it was put to her that this was sent to her at her email address, she conceded that this was the case and that she did receive it. It was then put to her that she did not communicate with the Trustees until February 2012. Ms Cheung said that there were no communications because she was seeking legal assistance. She then said that there might have been undocumented communication by way of phone calls. This answer had all the appearance of being made upon the run.
Ms Cheung was next taken to Annexure 14 to Mr Jess’s affidavit, being the letter to her from Worrells dated 1 December 2011. She said
she had received it. Although it was sent to her email address,
the applicant was then equivocal as to whether she had received it.
She equivocated and prevaricated when it was put to her that she had seen the enclosed copy of an exclusive auction authority. She appeared, if I understood her correctly, to say she had simply not read the letter dated 1 December 2011, an assertion I find unbelievable. She said
she was in Queensland at the time and had no access to the internet and had to go through friends. She then purported, having equivocated further, to say that the Annexure 14 was one that she had read for the first time on the day of the hearing (1 December 2015). This is plainly not true because she had certainly read Mr Jess’s entire affidavit.
Ms Cheung conceded that she received Annexure 16 to Mr Jess’s affidavit, being the letter from Mr Burness dated 7 February 2012.
She understood the reference to the annulment of her bankruptcy
in that letter and the necessity to provide a Statement of Affairs.
She conceded that her Statement of Affairs was eventually signed
on 12 March 2013.
Ms Cheung was taken to the report of Mr Holland, being annexed
to the affidavit of Emma-Jane Stevens sworn 12 June 2015.
She confirmed that it was her assertion that a number of the annexures were forged. In particular, she was taken to mortgage of land AF708917H. She denied that this was her signature (she is noted
on the document as the mortgagor). Although Ms Cheung accepted that she had taken out a mortgage with Westpac in respect of the property, she said not all documents were processed by her but some were by a broker, so far as she was aware.
Although Ms Cheung was adamant she had not executed the mortgage document, she confirmed that she made no complaint as to the discharge of the mortgage when the Notting Hill property was sold. This was, in the circumstances, a striking position to adopt.
Ms Cheung was taken to item (C) 16, Mortgage of Land AF708934H. This was a mortgage of the Docklands property. She denied that it was her signature on the mortgage, although she is named as the mortgagor. She conceded that the property itself was mortgaged.
Ms Cheung was taken to item (C) 17, Transfer of Land AB875122X. She once again denied that this was her signature, although it was
a property she had previously owned. She conceded that, notwithstanding she had not signed these documents, she had never complained thereof to the Trustee.
Ms Cheung was taken to item (C) 18, Mortgage of Land AB875123V. She was aware of the mortgage but not the signature on it. Essentially, once again, Ms Cheung said she assumed all the legal paperwork had been taken care of and had left this matter to her solicitors.
Ms Cheung was taken to item (C) 22, being Transfer of Land W960862Y, a property in Maribyrnong. Ms Cheung denied ever having owned the property and said the spelling of her name was wrong, being “Katie Loi Truong”. She denied that it was her signature on the document. She conceded, however, that she has been known
as Katie Loi Truong, which she said was the same name as Katie Truong.
Ms Cheung was taken to the affidavit sworn by Mr Lai. It emerges that he is in gaol for fraud for a sentence in excess of eight years.
When it was put to Ms Cheung that Capital Finance had made attempts to contact her through her intercom, she said this was a false assertion.
Ms Cheung also said that the copy of her driver’s licence retained
by Capital Finance was clearly faxed and this was part of the fraud.
Ms Cheung was further cross-examined about the time when Mr Lowe sought to serve her with the Petition. She said the papers were thrown in her face and that she threw them back at him. The documents were left there in the car park but were not there when she returned.
She denied that Mr Lowe had told her he had a Petition to serve on her. She said she had not avoided Capital Finance but had no idea about the debt.
Ms Cheung was cross-examined about the delay in providing her Statement of Affairs. She said she did not want the bankruptcy
to follow through because she was not responsible for it and provided the Statement of Affairs at a later stage in the context of seeking finance from her Trustees. Ms Cheung’s evidence in this regard was, in my view, self-serving and unsatisfactory.
I note that Ms Cheung, in response to questions, revealed
an understanding of the law, at least to some degree. In addition
to asserting the Trustees had failed in their duty of care to her,
she pointed out that the Trustees could have taken her case to court for directions to sort out the matters which she had raised.
Ms Cheung under cross-examination by counsel for the Trustee
Ms Cheung conceded she had a meeting with staff of the Trustee and gave some general information. She conceded she was told she had
to lodge a Statement of Affairs and she obtained legal advice from Chiodo & Madafferi. She was taken to a letter to her from Chiodo
& Madafferi in August 2011 (exhibit T1). She said she was not able to proceed as indicated in that letter because of lack of funds.
I note that the letter said, relevantly:
“You are now bankrupt and if you wish to annul the bankruptcy we need to make application to the Federal Crt and show that the appointment of the Trustee was either appointed incorrectly or there were no grounds for him to be appointed or that your bankruptcy is unjust.
We note your comments about the service of the documents which (apart from owing the debt) seems your main complaint
Again it is our view that service was properly effected and that the appointment of trustee was regular as the court had before
it a judgment obtained in the Magistrates court.”
Further cross-examination traversed the extensive delay in the various actions taken by Ms Cheung but do not necessarily add much to the overall picture.
Evidence in re-examination
Ms Cheung confirmed that “KT”, “Katie” and “Katherine” are pretty much the same name. “Truong”, “Zhang” and “Chang” and “Cheung” are all different spellings of the same surname, depending on whether you take the Vietnamese or Chinese version.
Ms Cheung referred to the fact that the BMW contract was dismissed and the two Mercedes contracts likewise (this followed a complaint
to the Financial Services Ombudsman, who proceeded on the basis of
Mr Ganas’ report).
Ms Cheung said the Statement of Affairs was just a formality because the Trustee was well aware of her finances.
Ms Cheung said the Trustees made allowances for their own legal costs but denied the same to her. Ms Cheung repeated her complaint that the Trustee had failed to follow up after she had pointed out the various inadequacies in the original loan documentation. Ms Cheung said the Process Servers went to the wrong apartment and, essentially, repeated her assertions that a number of documents were forged and were obviously not her signature. She noted in item (C) 22 “Truong”
is misspelt and that attempted service was not possible because they did not have the correct telephone number.
The evidence of Mr Philip Andrew Duxbury
Mr Duxbury adopted his affidavit as true and correct.
Ms Cheung indicated that she objected to the receipt of the documentation on the footing that it was all after the fact of the execution of the bankruptcy and second-hand information. I pointed out to her that it was, essentially, based on business records. Subject
to sustaining her objection, Ms Cheung did not wish to put any questions to the witness.
I said I would rule upon her objection and that this can be done shortly. Mr Duxbury’s evidence is all plainly business records within
the expanded definition in the Evidence Act 1995 (“Evidence Act”) and was plainly admissible.
The evidence of Mr John Ganas
Mr Ganas adopted his affidavit affirmed 30 November 2015
as true and correct. This affidavit annexes his report dated 14 August 2014.
Mr Ganas, in evidence-in-chief, indicated that he was in private practice but had been employed by Victoria Police since 1990.
The first report dated 14 August 2014 was at the request of the Financial Services Ombudsman. He was provided with the original Capital Finance documents and, in his second report, dated 27 January 2015, he relied upon the same source documents. He had been told at the time of the second report that the specimen signatures were no longer available.
Under cross-examination by counsel for Capital Finance, Mr Ganas confirmed paragraph 4.1 of his 14 August 2014 report, insofar
as it asserted that “The examination was limited by the non-original nature of the questioned documents submitted for examination.”
Mr Ganas confirmed that it is always better to work with originals, both in regard to samples and questioned signatures. Mr Ganas confirmed that gross features are observable by eye. There is no point in microscopic examination of copies. He did not need a microscope
to examine signatures. He said that documents marked B1-B6 were not genuine because the gross differences were enough to support that opinion.
When taken to his report of 27 January 2015 in paragraph 4.1, it was put to him that this had been cut and pasted. Mr Ganas conceded that this was correct. He was told that he should use the documents that
he used in the Ombudsman inquiry because the original documents were not available. He worked off copies. He said, having examined the original documents, not having the originals was not a limitation. He looked at his computer records where he had scanned the originals.
It was put to Mr Ganas that it is desirable to have sample signatures both before and after the questioned documents and he conceded that this was the case.
In re-examination, Mr Ganas confirmed that the closest sample signatures, provided to him, in terms of time, to the guarantee were from 2005. He further confirmed that the signature of the applicant was consistent from 2005 to 2014. He confirmed that originals would have made no difference to his second report.
The Evidence of Mr Neil Holland
Mr Holland is a Forensic Document Examiner. He adopted his report annexed to the affidavit of Ms Stevens, to which I have earlier referred. He confirmed the original documents he had looked at and that he had included (C) 18 as an appropriate document. It pre-dated the Guarantee on 10 July 2014. (C) 18 was a control document. Most of the documents post-dated the Guarantee, but it was very important to have pre-dated documents. You want before and after. This enables the examiner to work out the range of variation. It was Mr Holland’s evidence that the structure of the signature in later documents in 2015 was the same as the ones in 2002 to 2003. The 2004 signature was the same as the 2002 signature, but there were greater variations in the 2015 signature. Mr Holland referred to items (C) 17 and (C) 18, which pre-dated the signature on the Guarantee, and said they were almost identical to it. He confirmed that signatures at a later date in (B) 7,
(B) 8 and (B) 9 had a slightly different style of signature, but certainly had a sequence pattern similar to the standards, and it was the same writer. The original Guarantee was tendered as exhibit C2.
Under cross-examination by Ms Cheung, Mr Holland confirmed that signatures signed KT were inappropriate for comparison, because they were two distinct signatures. Mr Holland confirmed that he was given the original Capital Finance documentation, examined the original questioned documents, and he examined the original control documents as instructed by Capital Finance.
Item (C) 13 was a control signature which was different to the other control signatures. The other controls were more important.
He ignored (C) 13. He was unable to say whether items (B) 2 and (C) 13 were the same author.
When asked to compare items (C) 18 and (B) 2, Mr Holland said he examined the stroke sequence. He could not be definitive which part of the signature was the letter K. He noted that while the signature
in (C) 18 is on the baseline and (B) 2 is rising, this is a variation but not a distinct difference. These are control features. (C) 18 was 2002, and (B) 2 is 2014. Signatures are never really the same. He would expect to see variations between 2002 and 2014. The signature on (B) 2 and (C) 14 and the other documents were the same, but (C) 13 was different.
Mr Holland confirmed that he did not measure the height of the signatures, but his assessment was made on visual examination. Document (A) 1 (the Guarantee) was the same signature as (C) 18.
He said (A) 1 and (B) 2 were still the same stroke sequence, but the detail was not the same because this was in 2014.
Mr Holland confirmed that he had not read Mr Ganas’ report. He said photocopies could make a huge difference.
When asked if he had ever made mistakes, Mr Holland very fairly conceded that he had made an error in one matter in New South Wales involving a large number of handwritten entries. Mr Holland conceded making what, to my mind, was a very minor mistake.
Mr Holland was quite clear that the writer of the standard signatures wrote the four signatures on the four Capital Finance documents.
He was quite clear that he had not made an error in this regard.
The evidence of Mr Lazzaro
Mr Lazzaro was called and gave evidence. He is a Finance Broker.
He worked for Patterson Cheney in 2004 full-time on a site conducted by a Mercedes Benz dealership. He was Business Manager of Finance and Insurance and had been with this employer for at least one year
by 2004. He has always worked in finance and had done so for three years before 2004.
He was taken in evidence-in-chief to the Guarantee. He confirmed that it was his signature on the document. He said he did not recognise
Ms Cheung nor remember her. He would have written hundreds
of loans, and about half would have had Guarantees. He said he would only sign if he saw the witness sign before him and would take
a photograph of the driver’s licence to submit to the financier. There were simply no exceptions to this system of signing. He agreed that it was probable he had not met Ms Cheung until they came
to collect the car.
Under cross-examination by Ms Cheung, Mr Lazzaro confirmed that he was employed by Patterson Cheney, which owned the premises,
but was not an employee of Capital Finance. He received remuneration for the sale of finance products. Capital Finance was
a second financier. The first was Mercedes Benz, and it was likely that Mercedes Benz had refused finance. He might well have got
no commission. There were no financial targets for commission.
Mr Lazzaro said there were about 20 or 30 finance applications
a month, worth approximately $2 million. He said he typed everything in. He said all variable information is put into the computer system
by him to generate the document, and he might have got the telephone number on the Guarantee from the salesperson. He did not verify length of residence and income was not relevant to the lender. This was commercial lending. What was required was proof of property ownership, such as title or a rates notice. He said he needed the driver’s licence during the process and, indeed, needed it for there to be a test drive.
Mr Lazzaro was taken to the copy of the driver’s licence appended
to Ms Cheung’s affidavit sworn 15 July 2014 at page 59 of the annexures. He accepted that there was a line down the middle and that it would have been faxed. He said, nonetheless, he still needed to have seen the licence. He said, “There’s no question about that.” He would have needed proof of property ownership also.
It was put to him that his signature on the document was black and that Ms Cheung’s was in blue. He said he had a good pen which he did not allow customers to use. He said asset declaration could be taken before the purchase documentation was completed.
The evidence of Mr Peter John Lowe
Mr Lowe is a Private Investigator and Process Server who was previously in the Police force for 25 years. He adopted his Affidavits of Attempted Service annexed to the affidavit of Mr Duxbury, including the assertions that he left his card under the door
of Ms Cheung’s residence. He further confirmed an Affidavit
of Service sworn on 10 February 2011, which was tendered as exhibit C3. He had been a Process Server for about six to seven years when the events of 2 February 2011 occurred. He had a clear recollection
of the day.
He followed his normal practice and has served a lot of people over many years. He said he recalled Ms Cheung’s actions. She threw
the Petition out the window. She subsequently stopped and took
a photograph of him. He basically repeated the facts as set out in his affidavit. He said that not many people do that (throw the Petition out the window).
Under cross-examination by Ms Cheung, Mr Lowe confirmed that
he initially went to the carpark, where the Manager’s Office is. The Manager let him in the first couple of times. On the occasion
in question, he was able to enter because somebody drove out. He was unable to say how many levels there were in the carpark, but he walked round it. From memory, he stood to the left of the security door entrance. He was near the door where you enter the carpark and had
a clear view of the car of Ms Cheung. He said Ms Cheung emerged with her daughter, who was a little child. Mr Lowe conceded he had no warrant to enter the property. He approached Ms Cheung and asked, “Are you KT Cheung?” and said that Ms Cheung replied, “Yes.”
He said that after that he gave her the Petition. He conceded that
he was over six foot tall and was of solid build. He could not recall
if the car door was open or closed, but the window was open. He made no attempt to open the door and was not too sure if the window was open. He said Ms Cheung was seated in the car. Either the door
or the window was open. Ms Cheung threw the documents at him and took a photograph of him. She threw the papers, and they fell down
a level.
The picture that emerged was necessarily somewhat mouvemente’,
but Mr Lowe was clear that having thrown the papers back at him,
Ms Cheung picked the papers up and then subsequently threw them out again, they then falling one further level. Mr Lowe picked the papers up as he was exiting the building by walking down the various levels.
The evidence of Mr Paul Andrew Burness
In evidence-in-chief, Mr Burness adopted his affidavits as true and correct and confirmed the affidavit of Mr Jess as true and correct to the extent that it dealt with matters which were within his knowledge.
He tendered as exhibit T2, a tabulation of the alleged assets of the estate, and the costs engendered in its administration.
He confirmed that he had obtained two forensic reports, one following discussion with Ms Cheung and the other court-ordered.
Under cross-examination by Ms Cheung, Mr Burness confirmed
his qualifications and that he had an understanding both of contract law and of the guidelines issued by ITSA. He said he had investigated
Ms Cheung’s affairs as Trustee and was aware of properties in Mount Waverley and Docklands. He said there might have been enough
to discharge the bankruptcy in 2011. He confirmed that a claim from BMW was withdrawn, and two contracts with Mercedes-Benz were likewise withdrawn as creditors of the estate. He said he believed
he had seen Ms Cheung’s daughter and that one of the contract documents had suggested that Ms Cheung had no dependents.
(This and certain other matters were also traversed with Mr Lazarro). Mr Burness said that such contracts or such documents are often
not well filled in.
Mr Burness thought that he suggested the first forensic investigation some years ago. It was inconclusive. The expert wanted further samples. If the evidence had suggested that the Guarantee
was fraudulent, he would have rejected the claim in bankruptcy.
He thought the judgment on which the bankruptcy was based took place in 2010.
He confirmed that Ms Cheung had made frequent requests for funds
to pay lawyers and that she was represented for 12 months by a firm whose instructions were withdrawn. He confirmed that he had contemplated the release of funds for legal fees, but he put conditions around the release of funds because he was concerned about related creditors. He confirmed that he had received documents from
Ms Cheung’s family members and said that in the early stages
he encouraged Ms Cheung to bring her concerns forward to the attention of the authorities and to court. He did not accept that he was permitting the question of his own fees to override the proper administration of the estate.
Mr Burness was aware of the findings made by Mr Ganas,
but these were inconclusive. He said he tried to avoid coming to court because he was conscious of court costs. He brought
the matter to court to sell the Docklands property. He considered
the costs of legal proceedings before they were issued. He said he had explored all other options before doing so.
Some findings to the credit of the witnesses
Since I have just dealt with him, it is perhaps appropriate to start with Mr Burness. Mr Burness was, of course, in large part, relying upon business records which, in my view, had not been the subject of any effective challenge, both in terms of his own evidence and that of the evidence of Mr Jess which he effectively adopted.
Under cross-examination, he struck me as being a particularly good witness. He was direct and responsive to the questions put, and his answers were measured and careful. I accept him entirely as a witness of truth.
The witness who preceded Mr Burness was Mr Lazzaro. Once again, he was a good witness. He responded directly and appropriately to the questions put to him. He made it quite clear that he had no memory
of Ms Cheung in any kind of direct sense. His evidence was given about his practice in the discharge of his duties that involved
the execution of documentation. His evidence was given with transparent honesty, and I accept it.
The witness who preceded Mr Lazzaro was Mr Holland. I will deal with Mr Holland when I deal with Mr Ganas, as their evidence touched on the same field.
The witness who I have overlooked is Mr Lowe. Once again, he was
a good witness. His evidence about the incident when he sought
to serve the Petition was transparently honest. Although,
as Ms Cheung put to him, it is clear that he obtained access to the carpark as a trespasser by entering when somebody happening to drive out and not with authorisation, he made no endeavours to quibble.
It is sufficient to say that I found Mr Lowe’s account of the incident and his evidence generally to be entirely credible, and I accept it.
The only other witness called by the creditors was Mr Duxbury, and
he was effectively not the subject of cross-examination. There is no reason to doubt his evidence at all.
This leaves the evidence of Ms Cheung. It is always regrettable
to make critical remarks in a judgment about the evidence of a witness. Ms Cheung was self-represented, and these proceedings must have represented a significant strain on her, although her demeanour did not suggest that she was under any undue pressure.
I have already commented from time to time in dealing with her evidence about aspects of it that were unsatisfactory. She was, I regret to say, taken overall, a poor witness. A number of her answers (such as the failure to study the business cards left by Mr Lowe) were simply unbelievable. She is a highly intelligent woman with post-graduate academic qualifications who well understood the various pieces
of correspondence she received from time to time. A number of her answers were prevaricating and were made up on the run, as I have indicated. It is sufficient to say that where there is conflict between the evidence of Ms Cheung and the witnesses called by the other parties,
I prefer the evidence of the other parties.
Findings on the facts
So far as the question of delay is concerned, I think that Ms Cheung knew by 2009 that someone was chasing her for a debt. I had some discussion with counsel as to whether this proceeding is interlocutory or final in its nature, but whichever of those might be said to be correct, the business record establishing the conversation in 2009 is far more probably with Ms Cheung than with anyone else.
Furthermore, and irrespective of whether Ms Cheung knew about her debt in 2009, I have no hesitation in finding that she well knew that
Mr Lowe was seeking to get in touch with her, and I fully accept
Mr Lowe’s version of the service of the Petition upon her. I repeat,
Ms Lowe is a highly intelligent woman and would have had
no difficulty in understanding the nature of the papers served upon her.
After the bankruptcy took place, Ms Cheung was aware from an early stage that she had avenues available to her to either set aside
the Sequestration Order and/or to set aside the judgment upon which
it was based. So much is clear from the letter from Chiodo & Madafferi, constituting exhibit T1, and from the evidence of Mr Jess and
Mr Burness.
What is apparent, of course, is that Ms Cheung, who has resolutely sought to ignore all the legal proceedings brought against her, responded to the Trustees’ inquiries in a fashion that was always combative and accusatory. She sought release of funds for legal fees, but the Trustees’ ultimate failure to do so was, in the circumstances, entirely appropriate.
The fact is that Ms Cheung had Chiodo & Madafferi acting for her for an extended period of time and took no steps to set aside the bankruptcy.
Furthermore, the endeavour to set aside the original Magistrates Court judgment was known to be wholly unsuccessful by early 2013.
The reality is that Ms Cheung did nothing until the Trustee sought
to sell the Docklands property. Only then did she file her annulment application, and only subsequently again her application to set the bankruptcy aside. Even assuming, in Ms Cheung’s favour, that the application for annulment arose from a misunderstanding on her part and should have been an application to set aside, the reality is that there has been a very substantial period of delay.
This failure to cooperate in a general way was also expressed in the very tardy provision of the Statement of Affairs.
All this, of course, means that there has been very substantial administration of the estate and substantial litigation, such that, at best, the liquidity of the estate is open to considerable question. In all the circumstances, I would find that Ms Cheung’s conduct has been one
of inordinate and unjustified delay.
This brings us to the overarching and critical issue of the validity of the original Guarantee.
The evidence of Mr John Ganas and Mr Neil Holland
It should be stated straightaway that both Mr Ganas and Mr Holland were excellent witnesses who were clearly experts in their field. They were both careful in their answers.
It is important to note, however, that Mr Ganas was asked to comment on documents executed in 2004 and had samples only from 2005
to 2014. It was his evidence that the signatures were consistent over that period.
I should note in passing that the endeavours to discredit Mr Ganas’ evidence on the footing that he did not have originals when
he conducted his second report is not one I accept, but I do note that
Mr Ganas’ source documents, so to speak, appear to have been copies, something that he conceded was undesirable.
What leads me to accept the evidence of Mr Holland in preference
to that of Mr Ganas is both the question of the original control signatures and, more particularly, the fact that those available
to Mr Holland both pre-dated and post-dated the questioned documents.
His answer that you need both before and after documents makes eminent sense.
I accept that Mr Holland attended the Land Titles Office to look at the original documents to which he referred, and it is clear that documents (C) 17 and (C) 18 pre-date the questioned document.
Furthermore, having seen and heard him give his evidence, I found
Mr Holland’s overarching explanation of variations between signatures between 2002 and 2014 to be convincing. His answers under
cross-examination all made eminent sense. He emphasised that while he had not read Mr Ganas’ report, the provision of photocopies
can make huge differences. The fact that he made one mistake in one hearing in New South Wales was a concession that Mr Holland made very fairly and very readily (no one would have known if he had denied it), and putting the matter shortly, his methodology was, to my mind, entirely convincing.
Further comments
I have already said what I have had to say about Ms Cheung’s credit. By now, she may well believe the story she has been saying for
so many years. It must be remembered that her response has been, since a relatively early stage, to the effect that the original Guarantee was a forgery. That document was executed at a time when it is not clear whether or not she was still in a relationship with her former husband, Mr Lai. I pay regard to the fact that he is undergoing
an extensive period of imprisonment, apparently for fraud.
Mr Lai, of course (and Mr King), were not called to give evidence, and I give their affidavits no weight accordingly. It should be noted, moreover, that although Ms Cheung has asserted forgery from an early stage, she did not do so right from the beginning. It took her some time before this important assertion was made.
A finding such as this is one to which s.140 of the Evidence Act applies. It is not to be made lightly. Having regard, however, to the evidence as a whole, including the evidence of Mr Holland and, indeed,
the evidence of Ms Cheung herself, I have no doubt that Ms Cheung did indeed execute the original Guarantee. The form may well have had errors, but as Mr Burness pointed out, such are not uncommon.
Furthermore, it is not uncommon for the person executing
the Guarantee to receive no direct benefit therefrom. This disposes
of Ms Cheung’s arguments that she never possessed the relevant vehicle.
I also note that BMW and Mercedes Benz, one way or the other, have withdrawn various claims. These are not as conclusive as Ms Cheung asserts. The report of the Financial Services Ombudsman relied upon
a report which I do not accept, and there is no particular explanation
as to exactly why BMW withdrew.
Perhaps another critical aspect of this matter is that Mr Lazzaro was such a good witness. His evidence was entirely compelling. It was his invariable practice not to sign as a witness until the person whose signature he was witnessing had themselves signed the relevant document. It is eminently understandable that, as a matter of sound commercial prudence, this would have been his practice. Likewise, given the second string nature of Capital Finance as a lender,
it is entirely conformable with business practice and common sense that no funds would have been advanced without both a sighting of the original of Ms Cheung’s driver’s licence and the possession of a copy thereof. Ms Cheung’s assertion that this might have been faxed may well be true, but it does not take her where she wishes to go.
In the end, the totality of the evidence could not be clearer. For whatever reason, Ms Cheung executed the Guarantee in 2004. She was subsequently the subject of judgment in the Magistrates Court against her as a result. She tried to set that judgment aside some three years later and failed. She was bankrupted in 2011, and her interaction with the Trustees could scarcely be described as cooperative, quite the contrary.
Conclusion
In circumstances where, as I find, the original debt was indeed owing, and the conduct of Ms Cheung has been so exceptionally dilatory, any consideration of the matters set out in Hunter Valley Developments
v Cohen (1984) 3 FCA 176 leads inexorably to the conclusion that time should not be extended to permit Ms Cheung to bring her Application to set aside the bankruptcy. There is, of course, no issue that the Court has power to do so, but it should not be exercised.First, the relevant time limits should not be lightly ignored.
This Application is three years and 300 or so days out of time, when this Court’s Bankruptcy Rules require the Application to be made within 21 days of the date that the Sequestration Order was made (r.2.03(2) of the Federal Circuit Court (Bankruptcy) Rules 2006).
The time limits are not set arbitrarily. They reflect the public interest
in the proper administration of the bankrupt estate. The time extension sought by Ms Cheung is enormous.
This leads to consideration of the length of the delay, and it is not necessary to say more.
The next matter to be considered is the explanation for the delay,
and I have already dealt with this above. There is no satisfactory explanation whatever for the delay.
I am further required to consider the prejudice to any other parties. Because of the way the matter has unfolded, and for which Ms Cheung bears a very significant measure of responsibility, there will
be inordinate prejudice both to the Trustee and to Capital Finance if the matter is allowed to proceed. We are at a stage, according to exhibit T2 (which of course I approach on the footing that Mr Burness was not cross-examined in any meaningful way about its contents), where
the costs have totally run away with this estate. Any further litigation will only increase those costs and further prejudice the ultimate distribution to outstanding creditors.
I am also required to consider the prospects of the success of the underlying Application. Given that I have roundly rejected the central proposition upon which Ms Cheung relies, namely, that the original Guarantee was a forgery, the Application, taken overall, can have no prospects of success. Plainly, the fact of indebtedness means that the creditor was entitled to issue first a Bankruptcy Notice and then
a Petition.
For the reasons given, I have rejected Ms Cheung’s complaints about service. She was well aware that a Petition was under way in 2011, when she was served by Mr Lowe.
In those circumstances, and the debt certainly never having been satisfied, the Sequestration Order plainly was validly made and the Trustee validly appointed.
The applicant’s prospects of setting aside the Sequestration Order, notwithstanding the concession by Mr Burness that as at the time of the Sequestration Order there might have been sufficient assets in the estate to discharge the creditors as they ultimately came
to be understood to be, are minimal.
For all the above reasons, which cumulatively are overwhelming,
it is entirely apparent that the Application to extend time to enable
Ms Cheung to bring her Application to Review a decision of the Registrar to make a Sequestration Order should not be granted.
I will dismiss the Application for an Extension of Time in which
to bring the Application for Review, and, to the extent that it may
be further necessary to do so, I will dismiss the Application for Review.
The further conduct of the matter
There are two further proceedings underway. In the face of the findings I have made, which would seem to me to operate on the central issue of the forgery as an issue estoppel, the Annulment Application must be seen to have little chance of success. The findings I have made about the applicant’s delay seem to me to be just
as applicable to the Annulment Application, and the various difficulties associated with the accrual of costs and insolvent nature of the estate will apply with equal force to the Annulment application.
The Annulment Application, unlike the setting aside Application,
is not a hearing de novo (it should be noted that nothing has turned
on the de novo aspect of this hearing, as we have been concerned only with the extension of time, not the formal matters required to be proved for a Sequestration Order to be made). Pursuant to s.153B of the Bankruptcy Act 1966, the Court would need to be satisfied that the Sequestration Order ought not to have been made. The chances of this test being satisfied are, as I have indicated, minimal.
Furthermore, in the circumstances, the chances of Ms Cheung being able to resist the Trustees’ application for the sale of the Docklands property would seem to me to be as close to non-existent as makes no difference.
This is an unusual set of circumstances, where the nature of the findings I have made on one view effectively dispose not only of this proceeding but also of the two ancillary proceedings.
In the circumstances, I will give the parties an opportunity to consider these reasons for judgment, and I will hear them both as to the future conduct of the matter and as to what costs orders should be made
in any event.
I certify that the preceding one hundred and sixty-seven (167) paragraphs are a true copy of the reasons for judgment of Judge Burchardt.
Date: 3 March 2016
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