FEDERAL COURT OF AUSTRALIA Szita v Capital Finance Australia Limited (2004) FCA 477 MICHAEL JOHN SZITA v CAPITAL FINANCE AUSTRALIA LIMITED V 860 OF 2003 NORTH J 2 FEBRUARY 2004 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V860 OF 2003 BETWEEN: MICHAEL JOHN SZITA APPLICANT AND: CAPITAL FINANCE AUSTRALIA LIMITED RESPONDENT JUDGE: NORTH J DATE OF ORDER: 2 FEBRUARY 2004 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The proceeding is dismissed. 2. The applicant is to pay the respondent's costs of the proceeding on an indemnity basis. 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 V860 OF 2003 BETWEEN: MICHAEL JOHN SZITA APPLICANT AND: CAPITAL FINANCE AUSTRALIA LIMITED RESPONDENT JUDGE: NORTH J DATE: 2 FEBRUARY 2004 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 Before the Court is a motion, notice of which was filed by the respondent, Capital Finance Australia Limited (Capital), on 18 December 2003, seeking orders that the proceeding commenced by the applicant be dismissed under O 20, r 2 of the Federal Court Rules or that the statement of claim be struck out under O 11, r 16. 2 The proceeding was commenced by the applicant on 10 September 2003 when he filed an application and an affidavit. The application seeks an order striking out an order granted by Magistrate Flack in the Liverpool Local Court on 21 August 2003, together with orders as to costs. The application was purportedly commenced pursuant to s 5(1) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the ADJR Act). The affidavit in support is sworn by the applicant and states: '1. I MICHAEL JOHN SZITA of 34 Purnell Road, Corio VIC 3214 state; 2. On the 21 August 2003 a purported authorised agent of Capital Finance Australia Limited (ACN 069 663 136), of Level 1, 88 Philip Street Parramatta NSW 2150 entered the property of 575 Staughton Vale Road, Staughton Vale VIC 3221. 3. This agent by the name of Darren? was allegedly authorised by Trojan Investigations and Commercial Services, (NSW) to perform such actions. 4. Darren? claimed he had a valid Order signed by Magistrate Flack from the Liverpool Local Court of New South Wales, to enter such premises within the Commonwealth of Australia and repossess one automobile, registration number REA 957. 5. I clearly stated that I had already served Capital Finance Australia Limited on the 30 July 2003 with relevant documentation to have this matter determined by VCAT on the 2 September 2003. 6. I was later informed that a NSW Local Court Order can override a decision pending at VCAT. 7. I ask for your intervention to this matter on the grounds that necessary documents were not filed by Capital Finance Australia Limited, and/or their authorised agent, and the decision by Magistrate Flack was in error due to the fact that he was ill informed on the entire matter. 8. JOHN STEWART, the original authorised agent of Capital Finance Australia Limited for whom Darren? was allegedly authorised to act, presented fraudulent documentation to Magistrate Flack and did attempt to persuade Magistrate Flack to accept those documents, which included an Affidavit, as fact. 9. I seek that the order of Case No. 122 462-03-119 granted by Magistrate Flack, be struck out on the abovementioned grounds and the automobile be returned to its registered owner MICHAEL JOHN SZITA LTD (ACN 103 604 897), as soon as possible.' 3 On 20 October 2003, this Court directed the applicant to file and serve a statement of claim by 20 November 2003, together with a document not exceeding three pages in length summarising the basis in law and fact of his claim. The Court also directed that, by 19 December 2003, Capital file and serve, if it were so advised, any application to strike out or dismiss the proceeding together with any affidavits in support. 4 The applicant filed a document headed 'STATEMENT OF CLAIM' on 19 November 2003. It states as follows: 'The applicant claims the relief specified in the Schedule to this application, pursuant to the common law which encompasses the law merchant, and in particular the rules relating to the law of principal and agent and the effect of fraud, misrepresentation, duress, or coercion, mistake, or other invalidating cause, shall continue to apply to contracts for the sale of goods.' 5 The 'Schedule' referred to in the statement of claim was the document summarising the basis of the applicant's claim, which the applicant had been directed to file. It is useful to set out the full text of the schedule: 'SCHEDULE THE CONSTITUTION 1. Covering Clause 5 of the Commonwealth of Australia Constitution Act 1900 (UK) confers jurisdiction on the Federal Court of Australia to determine matters arising from trade and commerce. In particular: "This Act, and all laws made by the Parliament of the Commonwealth under the Constitution, shall be binding on the courts, judges, and people of every State and of every part of the Commonwealth, …" 2. Section 99 states that: "The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another state or any part thereof." 3. Section 117 confers the following: "A subject of the Queen, resident in any State, shall not be subject in any other State to any disability or discrimination which would not be equally applicable to him if he were a subject of the Queen resident in such other State." 4. Also Section 118 affirms the following: "Full faith and credit shall be given, throughout the Commonwealth to the laws, the public Acts and records, and the judicial proceedings of every State." APPLICANT'S SUBMISSION 5. Therefore, it is the applicant [sic] contention that Capital Finance Australia Limited acting as Agent for the Bank of Scotland (NRGD 050 632 070), which includes, but not limited to, all Heirs, Agents and Assigns, hereinafter "the Respondent", has no bona fide claim/reason to breach the purported "…terms and conditions annexed hereto…" hereinafter "the alleged Agreement" between Applicant, and the Respondent. 6. The respondent must furnish Applicant with proof of any motive for not crediting Applicants [sic] alleged Account No. 122550 via the Certified Promissory Note No. MJS-011003-CFA that was presented to the Respondent no later than January 23, 2003. In doing so, Applicant asserts that the Respondent did not act in "good faith" and has therefore not fulfilled its contractual obligations with Applicant, and did perform in contravention to the alleged Agreement. 7. Any contention from the Respondent must be in the form of, written, documented proof, and be in accord with the laws/treaties/contracts/deeds that govern the Commonwealth of Australia (NRGD 050 075 600)/ (CIK 0000805157). 8. Therefore, Applicant requires an explanation from the Respondent pursuant to Section 36(1) of the Consumer Credit Code which states as follows; (a) "if a debtor, by written notice to a credit provider, disputes a particular liability entered against the debtor under a credit contract, the credit provider must give the debtor a written explanation in reasonable detail how the liability arises." 9. To this date, that being November 20, 2003, the Respondent has not provided any explanation pursuant to paragraph (8.) above. 10. Such blatant disregard of the law by the Respondent is a clear breach of the Respondent [sic] responsibility to provide in reasonable detail how the alleged liability arose. THE RESPONDENT ALLEGES THAT THE CONSUMER CREDIT CODE DOES NOT APPLY 11. The Respondent's belief that the Consumer Credit Code hereinafter "CCC" does not apply to the alleged Agreement, is completely misconceived. The Respondent and their purported authorized agents, have relied on the CCC, in particular Section 92 which states; (a) "the Court may, on the application of a credit provider that is entitled to take possession of the mortgaged goods, authorise the credit provider to enter residential premises for the purpose of taking possession of mortgaged goods." 12. If the CCC does not apply to Applicant, then adequately it also does not apply to the Respondent. 13. Commonwealth legislation provides that "All persons shall be equal before the courts and tribunals." Therefore any purported "business declaration" cannot supersede statute, let alone Applicants common-law rights pursuant to the principals that govern commerce. Any contention by the Respondent to the contrary, is null and void. 14. For the same rights and remedies apply equally to all parties to a contract/agreement. PLAIN STATEMENT OF FACTS 15. For resolving a matter it must be expressed by either, affidavit, by payment, by agreement, or by resolution by a jury according to the rules of the common-law. (a) In commerce truth is sovereign. (b) Truth is expressed in the form of an affidavit, or under oath. (c) An un-rebutted affidavit stands as truth in commerce; (d) An un-rebutted affidavit becomes the judgement in commerce: DEBT COLLECTOR DISCLOSURE STATEMENT 16. The Respondent consents to the provisions in Respondent's Private, International, Administrative Remedy Demand No. MJS-011003-CFA, in conformity with the principals of commerce, which ratify "the consent of the owner shall be presumed in the absence of evidence to the contrary." 17. The Respondent has not provided evidence to the contrary as requested for in the Debt Collector Disclosure Statement. Thus the Respondent has consented to the facts contained therein, and that they are true, correct and complete. Therefore the Respondent has no bona fide claim against the Applicant. THE NEGOTIABLE INSTRUMENT (INDIVIDUAL MOTOR TERM PURCHASE) 18. It has come to the attention of Applicant (alleged Borrower) after researching the Uniform Commercial Code hereinafter the "UCC", and the CCC, that there is reason to believe that the Respondent (alleged Lender) is not the Holder in due course of the original Negotiable instrument, hereinafter "Note" and is therefore in breached of the alleged Agreement. 19. The Respondent allegedly endorsed the Note by signing the Memorandum of Acceptance on December 5, 2003 and deposited it like a "check" thereby altering it after it was signed and did not disclose this fact to Applicant. 20. The Respondent used the endorsed Note to fund the alleged Agreement with Applicant, by drafting out of the deposit account and calling it a "loan" and charging interest on it. 21. There was no consideration given on the Respondents [sic] part for the Note. For a binding contract to be created, consideration must be legally sufficient. To be legally sufficient, consideration for a promise must be legally detrimental to the promisee. In this case the promisee (the Respondent) had no cost and no risk. So, there is no binding contract. 22. Applicant particularly notes that when the Respondent deposited the Note of Applicant, it increased not only their assets, but also their liabilities. Genuineness of assent is lacking because of the concealment of material facts and undue influence. In other words there is not true meeting of the minds and Applicant did not voluntarily consent to the terms of the Note because the true terms were unknown to Applicant. The Respondent is the purported expert, and aught [sic] to have known better. 23. Since Applicant paid money in the form of a Note to the Respondent to perform according to the alleged Agreement, Applicant is now hereby requesting adequate assurance of due performance pursuant to Section 36(1) of the CCC and UCC 2-609, to establish on reasonable grounds that the Respondent has performed according to the alleged Agreement and the Applicant (original Lender) used its own money to purchase the Note, not as the Respondent has led us all to believe. 24. There has been no response from the Respondent or their legal representatives regarding Section 36(1) of the CCC and UCC 2-609, therefore consent applies in accordance with the principals of commerce, in favour of Applicant pursuant to paragraph (15.) and (16.) above. 25. Applicant asserts that there is fraudulent concealment of material facts in the Note. 26. The trustee has turned the security instrument on the Note into a deed on the automobile. This is a fraudulent transfer. Just as an invitation to a party who is not a party, the so-called deed of trust is not the lien on the privately owned automobile. It is only the lien on the Note. The lien on the Note cannot be converted into a lien on the automobile. If that is done, it is fraudulent conversion. And correspondingly, a notice of lien from the Vehicle Security Register "VSR" on the automobile is not a valid/honest lien. The public trustees fraudulently convert the notice of lien into a lien on the automobile, which the Respondent dishonestly appropriated via fraud, misrepresentation, duress, coercion and/or any other invalidating action, on August 25, 2003. 27. The invitation to the party is not the party. The notice is not the lien. 28. The Respondents lien over "Secured Party's" private-property is a fraudulent lien. When the underlying lien and Note are fraudulent documents, the entire paper process is likewise fraudulent. THERE IS NO DISPUTE REGARDING THE ALLEGED DEBT 29. Regardless of whether the Federal Court has jurisdiction to hear this matter, it is an undeniable fact that there is no dispute about Applicants [sic] discharge from the alleged Agreement. 30. The alleged Agreement was discharged no later than January 23, 2003. 31. The Respondent has refused to tender the Certified Promissory Note MJS-011003-CFA, to Applicant and in accordance with Section 92 of the Bill of Exchange Act 1909 (Cth), Section 198B of the Corporations Law (Cth) and UCC 3-603, the alleged Agreement is hence discharged. Any contention to the contrary is null and void. SECURITY AGREEMENT 32. It is Applicants understanding that the Respondent does not hold a perfected security interest in any property of "Secured Party" and likewise in any secured collateral of "Secured Party", pursuant to the filing of a UCC Financing Statement and Security Agreement No. MJS-100886-SA, filed with the UCC filing office. 33. Applicant furthermore asserts that there is a superior Mortgage over the automobile in question. This Mortgage No. MJS LTD-040203-MVSI was executed between "Secured Party" and MICHAEL JOHN SZITA LTD (ACN 103 604 897) on February 04, 2003. 34. The abovementioned security interest is non-negotiable and private between the parties and is not subject to any third party lien and/or interference, judicial or otherwise. Any contention to the contrary is null and void. PROOF OF CLAIM 35. In event the Respondent claims a perfected security interest in any property of "Secured Party," the Respondent must provide Applicant with proof of superiority of any such perfected security interest. 36. The Respondent was notified that "In event the Respondent does not provide proof of superiority of any such perfected security interest over that of 'Secured Party's,' by October 6, 2003, the Respondent will be deemed not to possess a bona fide claim over that of 'Secured Party'", in other words the Respondent will be deemed in Default. This default came into effect on the November 3, 2003. REMEDY 37. Upon the failure of the Respondent to substantiate such a claim and in accordance with the principals of commerce, the Respondent will hereby consent and agree that the Respondent does not hold a bona fide claim and furthermore hereby consents and agrees that the Respondent must provide all means necessary to indemnify Applicant for the inconveniences accrued and the losses sustained. This must be provided on an indemnity basis. 38. Such indemnity will be paid no later than 28 days after the Respondent will be deemed in Default of substantiating any purported claim. The expiry date for payment will be December 1, 2003. NO LIABILITY BY "SECURED PARTY" 39. Applicant furthermore asserts that, "Secured Party" is not now, nor has "Secured Party" ever been a surety, nor an accommodation party, for Applicant, nor for any derivative of, nor for any variation in the spelling of Applicant, nor for any other juristic person, and is so indemnified and held harmless by Applicant in Hold-harmless and Indemnity Agreement No. MJS-100886-HHIA against any and all claims [sic] legal actions, orders, warrants, judgements, demands, liabilities, losses, depositions, summonses, lawsuits, costs, fines, liens, levies, penalties, damages, interests, and expenses whatsoever, both absolute and contingent, as are due and as might become due, now existing and as might hereafter arise, and as might be suffered by, imposed on, and incurred by Applicant for any and every reason, purpose, and cause whatsoever.' 6 On 18 December 2003, Capital filed the notice of motion presently before the Court, together with an affidavit sworn by its solicitor. That affidavit exhibits a number of the documents which are referred to in the applicant's schedule, and provides some background to the proceeding before the Court. That material was supplemented by a correcting affidavit, sworn on 29 January 2004, which annexed a copy of the applicant's submissions filed in the Victorian Civil and Administrative Tribunal (VCAT), a related proceeding which will be referred to later. 7 The material before the Court reveals that the applicant entered into a hire-purchase agreement with Capital for a Porsche motor vehicle in December 2001. The agreement provided for a total payment of $150,921.90, to be paid by 60 monthly instalments of $1356.08 and by a final balloon payment of about $70,162.50. The applicant made regular monthly payments until December 2002. The December 2002 and January 2003 payments were made, but dishonoured. By August 2003, the amount outstanding was $134,770.26. On 21 August 2003, Capital obtained an order allowing it to repossess the car. The order was obtained from Magistrate Flack in the Liverpool Local Court in New South Wales. It was made under s 92 of the Consumer Credit (New South Wales) Code 1995 (NSW). This is the order which the applicant has sought to have set aside. 8 Capital now brings this motion on the basis that the Federal Court does not have jurisdiction under the ADJR Act to set aside the order of the New South Wales Magistrate. Capital contends that the decision in question is not of an administrative character, and does not, therefore, fall within the definition of 'decision to which this Act applies' in s 3 of the ADJR Act. Further, to be reviewable under s 5 of the ADJR Act, a decision must be made under an enactment, as defined in s 3. The decision in the present case was made under a New South Wales statute. Schedule 3 of the ADJR Act sets out the Acts of States and Territories which are enactments for the purposes of the Act. The Consumer Credit (New South Wales) Code 1995 NSW is not included in the schedule. Thus, the jurisdiction sought to be invoked by the applicant is not available. This Court does not have power to set aside the order of the New South Wales Magistrate as the applicant seeks. 9 The case falls directly within O 20, r 2 (1)(a) of the Federal Court Rules which provides: '(1) Where in any proceeding it appears to the Court that in relation to the proceeding generally or in relation to any claim for relief in the proceeding: (a) no reasonable cause of action is disclosed; … the Court may order that the proceeding be stayed or dismissed generally or in relation to any claim for relief in the proceeding.' 10 Capital is entitled to the orders it seeks pursuant to this Rule in the motion and they must therefore be granted. 11 However, as the applicant is self-represented and has taken considerable trouble to explain the legal basis of his application, the Court will consider the applicant's Schedule in order to determine whether it discloses some other basis for the proceeding. 12 The applicant has sought to explain the contents of the Schedule in oral argument. The legal basis of the matters raised in the Schedule are difficult to understand and obscure. 13 One argument sought to be advanced from the Schedule is that the Magistrate's order for repossession of the car was unjustified because the liability that gave rise to that order had been discharged in January 2003. The applicant argues that he discharged his liability to Capital existing under the hire-purchase agreement by the delivery to Capital of a document headed "Certified Promissory Note". The Certified Promissory Note is entirely an invention of the applicant and does not evidence any obligations known to the law. It purports to be tendered "as full satisfaction of a [sic] alleged debt claimed" and thus to impose upon Capital a discharge of the liability owed by the applicant. It purports to achieve this simply by the delivery of this piece of paper to the respondent. Capital's solicitors have rejected this purported transaction but the applicant maintains his assertion that the document amounts to payment in full of his debt to Capital. The applicant raised the same argument before Deputy President McKenzie in the Victorian Civil and Administrative Tribunal in proceedings which he brought there. The Deputy President dealt with that, and related, arguments in pars [22]-[25] of her decision: '… He claims that Capital has no right to the car, because the car has been mortgaged to a company, Michael John Szita Limited, which has a superior claim. This is contrary to the terms of the contract which Mr Szita entered into, under which property in the car is said to remain in Capital and, in any event, is not supported by any evidence before me. Mr Szita claims that he did not himself contract with Capital, but that he contracted on behalf of another entity. This claim, too, is unsupported in any evidence before me. Mr Szita also claims that by sending to Capital a document call a "certified promissory note" dated 10 January 2003, specifying an amount of $116,375.95, Mr Szita has discharged any liability to Capital. The document, I note, is not drawn on a bank or financial institution. It is not, in my view, a tender of payment. Nor is it an immediate promise to pay. To the extent that it is comprehensible, it appears to say that at some period in the future, after some kind of request has been made by Capital, the debt in some way becomes payable. The document mentions an amount far less than the amount which, according to Capital's account, was currently then owing and does not explain how this amount was calculated by Mr Szita. This document is not, in my view, proper tender for payment. It did not, as Mr Szita claims, constitute payment in full of his debt to Capital.' 14 The Deputy President concluded at [44]: '…I have come to the conclusion that Mr Szita's claim is manifestly hopeless. His contention that there is a disputed liability under the agreement which he signed, because he offered to pay or, in fact, paid the debt in full by sending the document called a Certified Promissory Note is, in my view, wholly untenable. The document is, in my view, incapable of constituting tender of payment, sufficient to discharge the debt. This claim cannot be cured by amendment, and therefore should be dismissed, rather than struck out.' 15 I agree with the Deputy President. Each of the documents relied upon by the applicant were created by him, and purported to bind Capital without its consent. The Certified Promissory Note, which is said to expunge the outstanding debt, provided: 'As an operation of law, Payee/Debt Collector tacitly consents and agrees that there is accord and satisfaction by use of this instrument for satisfying Payee's/Debt Collector's claim and Maker is hereby discharged from liability on this alleged account and the obligation is suspended in accordance with law as codified at UCC §§ paragraphs 3-310(b), 3-311 and 3-603.' 16 This argument is manifestly hopeless. It has been found to be so by Deputy President McKenzie and whether res judicata applies, as is contended for by Capital, or not, it would be wrong to allow this claim to proceed further. 17 There is also reference in the Schedule to various sections of the Constitution. By these references the applicant asserts that there was a problem with a New South Wales magistrate's decision operating in Victoria. It is not clear how these constitutional provisions bear upon the present fact situation. Preference is not provided to one State over another within the meaning of s 99 as a result of the Magistrate's decision, nor is there any discrimination or disability imposed upon a resident of one State within the meaning of s 117 of the Constitution. 18 The applicant also argued that the execution of the order of the New South Wales magistrate was in breach of s 105 of the Service and Execution of Process Act, 1992 (Cth)because the order could not be executed in Victoria without being lodged in the Federal Court or in the State of Victoria. However, it is not clear how the applicant regards s 105 as applying to the present situation. 19 In all the circumstances, the proceeding should be dismissed. This does not determine that the applicant has no justified complaint against Capital. I say nothing either way on that matter. The areas into which the applicant has sought to tread are matters of some legal complexity. He may have proper legal grounds for challenging either the transaction for the hire-purchase of the car, or the manner of its termination. However, he has not demonstrated any legal basis upon which this Court can act to vindicate any rights which he may have in that respect. 20 Capital has sought costs on an indemnity basis because this is the second time on which the applicant has failed. The first occasion was before VCAT. On that occasion the case was also dismissed on a summary judgment application. In both proceedings essentially the same arguments were relied upon by the applicant. Whilst Capital is in the business of providing finance and it is an ordinary risk of its business that it will be involved in litigation, Mr McClelland, on behalf of Capital, argued that it should not be at risk of vexatious proceedings where the same arguments are dismissed for a second time. I agree with the submission, and, consequently, will order that the applicant pay the respondent's costs of the proceeding on an indemnity basis. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North . Associate: Dated: 21 April 2004 Counsel for the Applicant: Applicant appeared in person Counsel for the Respondent: Mr A McClelland Solicitor for the Respondent: Cridlands Lawyers Date of Hearing: 2 February 2004 Date of Judgment: 2 February 2004