Horvath, Gabor & Anor v Pattison, Paul A [1998] FCA 28

FEDERAL COURT OF AUSTRALIA BANKRUPTCY - whether bankrupt has standing to make an application in the Supreme Court of Victoria to set aside a judgment obtained against the bankrupt - whether trustee in bankruptcy has standing to make that application

Bankruptcy Act 1966 (Cth) s 178 Cummings v Claremont Petroleum NL (1995-96) 185 CLR 124 applied GABOR HORVATH & ANOR v PAUL A PATTISON VG 7030 of 1998

FINKELSTEIN J MELBOURNE 21 JANUARY 1998

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 7030 of 1998

BETWEEN: GABOR HORVATH

AGOTA HORVATH

Applicants

AND: PAUL A PATTISON

Respondent

JUDGE: FINKELSTEIN J

DATE OF ORDER: 21 JANUARY 1998

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT: 1. The application is dismissed. 2. The respondent's costs of the application be costs in the administration of the bankrupt estates of Gabor Horvath and Agota Horvath. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 7030 of 1998

BETWEEN: GABOR HORVATH

AGOTA HORVATH

Applicants

AND: PAUL A PATTISON

Respondent

JUDGE: FINKELSTEIN J

DATE: 22 JANUARY 1998

PLACE: MELBOURNE

REASONS FOR JUDGMENT HIS HONOUR: Yesterday I heard and then dismissed an application by Mr and Mrs Horvath, said to be by way of appeal from a decision of their trustee in bankruptcy, for the following orders, namely: "1. Grant leave from our bankruptcy to the (applicants) so (we) can file a summons in the Practice Court of Australia (sic) so (we) can read out, implement and enforce the Supreme Court Act of 1986, Division 4, Contract of Minors: ss 49-50-51, as it has never been done before. 2. Grant the (applicants) use of all the necessary document needed". What follows are my reasons for dismissing the application. A sequestration order was made by Merkel J against each of the estates of Mr and Mrs Horvath on 12 February 1997 upon the petition of the Commonwealth Bank of Australia. The act of bankruptcy upon which the Bank based its petition was the failure by Mr and Mrs Horvath to comply with a bankruptcy notice that had been served on each of them. The Bank had previously obtained a judgment in the Supreme Court of Victoria against Mr and Mrs Horvath in the sum of $338,816.93 and an application to have that judgment set aside, it having been obtained in default of appearance, was unsuccessful. The bankruptcy notices were based on that judgment. The action in the Supreme Court was brought to recover from Mr and Mrs Horvath a loan said to have been made to them and to their son together with interest payable on the amount of the loan. The repayment of the loan and the interest thereon was secured by a mortgage over certain land the registered proprietors of which were Mr and Mrs Horvath and their son. When the loan was made and the mortgage taken Mr and Mrs Horvath's son was a minor. Accordingly the Bank was not entitled to pursue its claim for the recovery of the debt from him and the mortgage that he executed was declared to be void in so far as it purported to secure in favour of the Bank the son's interest in the land. However, the Supreme Court, constituted by O'Bryan J, decided that the Bank had an equitable lien as chargee over the son's interest in the land for the sum of $53,978. It is not necessary to explain the basis of this finding. Mr and Mrs Horvath still contend that the Bank was not entitled to recover the loan from them. On 23 June 1997, some two and a half years after the Bank had obtained its judgment, Mr Horvath purported to file in the Supreme Court a defence to the Bank's claim and a counterclaim against the Bank. Mr Horvath then filed an amended defence and counterclaim on 26 June 1997. On 29 July 1997 Mr Justice McDonald struck out the defence and counterclaim filed on 23 June 1997 and the defence and counterclaim filed on 26 June 1997. The defence was struck out for the obvious reason that there was no longer any extant proceeding against Mr Horvath or Mrs Horvath which required the filing of a defence. The counterclaim was struck out on the basis that any cause of action which Mr Horvath wished to pursue against the Bank had vested in his trustee in bankruptcy and therefore could not be prosecuted by Mr Horvath. Notwithstanding this setback, on 23 December 1997 Mr Horvath filed a summons in the Supreme Court seeking a number of orders including the following: that the proceeding in which the Bank had obtained its judgment be set aside, that the Bank take steps to have the bankruptcy of Mr and Mrs Horvath declared void, that the Bank pay to Mr and Mrs Horvath certain costs, expenses and damages totalling $451,853 and that the Bank pay to Mr and Mrs Horvath compensation of $30 million. This summons was dismissed by Beach J on 7 January 1998 and His Honour ordered that Mr Horvath should not file any document or summons in the Bank's proceeding without the leave of a judge of the court. It is difficult to understand what Mr and Mrs Horvath seek to achieve by the summons which they seek leave to file in the Supreme Court. It seems to be that they wish to have the judgment against them set aside on the basis of the infancy of their son. When I enquired of Mr Horvath (the applicants appeared in person) precisely what relief he desired to seek in his proposed summons the only answer that I was given was a repetition of the relief set out in the application. What is clear is that Mr and Mrs Horvath are not seeking to appeal any decision of their trustee in bankruptcy. There is nothing in the material that has been filed on behalf of the applicants that suggests that they are complaining about any decision made by the trustee and nothing was submitted orally by Mr Horvath to that effect. If by the proposed summons Mr Horvath wishes to have the judgment that was entered against him and his wife in the Supreme Court set aside then it is clear that Mr Horvath cannot do so. He has no standing to make such an application. The reason is that, as a consequence of his bankruptcy, Mr Horvath no longer has any interest in the fact that a judgment has been recovered against him: Cummings v Claremont Petroleum NL (1995-96) 185 CLR 124 at 138. It is for the trustee to consider whether such an application should be made and if Mr Horvath is dissatisfied with any decision of the trustee in this regard he may apply to the Court under s 178 of the Bankruptcy Act 1966 (Cth) to compel the trustee to lend his name to the bringing of an appropriate application. If by the proposed summons Mr Horvath intends to avoid the lien declared to exist over his son's interest in the property it seems to me to be clear that he has no standing to do so. However, whether that is so or not, it is not appropriate for this Court to grant Mr and Mrs Horvath leave to take steps to protect their son's interest in the land. This Court has no jurisdiction to grant Mr or Mrs Horvath leave to make such an application in the Supreme Court. If by the proposed summons Mr Horvath seeks to overcome the order made by Mr Justice Beach that he may not file any document or summons in the Bank's proceeding in the Supreme Court without the leave of a judge of the Supreme Court, this Court does not have power to avoid the effect of that order. Even if the Court did have jurisdiction to make such an order I would not exercise it. It is for the Supreme Court to regulate its own proceedings and the Federal Court should not be concerned with the matter. If by the proposed summons Mr Horvath seeks to obtain some other relief in the Supreme Court I regret I am unable to discern what that might be and that is a sufficient basis for not granting the orders sought even if I had power to do so. Neither the respondent, the trustee in bankruptcy, nor the Bank, who was given notice of this application and appeared by counsel, sought any order for costs against Mr and Mrs Horvath. But it is appropriate that the trustee's costs be part of the costs of his administration of the two bankrupt estates. I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein