The history of the proceedings between the Horvaths, the Bank, and their trustee in bankruptcy
35 Problems between the Horvaths and the Bank first arose when the Horvaths failed to keep up payments in relation to the monies advanced to them by the Bank. Eventually, in January 1995, the Bank obtained judgment in default against both the Horvaths. In February 1995 the Bank obtained judgment in default against their son. As a result of these judgments, the Bank recovered possession of certain premises, and judgment for the sum of $295,287.00 plus interest and costs.
36 On 30 March 1995, the Horvaths and their son applied to the Supreme Court of Victoria to have that judgment set aside. The sole ground relied upon by them at that stage was that Gabor Horvath Junior had been an infant at the time that he purportedly entered into the loan arrangements with the Bank, and that those arrangements were therefore unenforceable both as against him, and as against his parents.
37 On 6 April 1995, Master Wheeler in the Supreme Court ordered that the judgment against Gabor Horvath Junior be set aside, but not the judgment entered against the Horvaths. The Master granted a stay of the judgment against the Horvaths. The Bank appealed against Master Wheeler's orders. On 23 May 1995 Beach J, in the Supreme Court, lifted the stay of the judgment against the Horvaths. The Horvaths did not appeal against his Honour's decision in that regard. That meant that the judgment against the Horvaths stood, and was enforceable at the behest of the Bank.
38 The Bank appealed against Master Wheeler's ruling insofar as it applied to Gabor Horvath Junior. On 2 April 1996, O'Bryan J in the Supreme Court found in favour of the Bank. His Honour held that that although the mortgage was void as against Gabor Horvath Junior, there was a debt owing by him to the Bank, and that judgment should be entered against him in respect of that debt. His Honour found that the Bank was entitled to an equitable lien or charge over the land in the sum of $53,978.00. An appeal was lodged by Gabor Horvath Junior against that decision. It is unnecessary for the purposes of this judgment to consider further the proceedings between the Bank and the Horvaths' son, save insofar as those proceedings raise matters which bear upon the dispute between the Bank and the Horvaths.
39 On 8 March 1996, the Bank, in reliance upon the default judgment of the Supreme Court (the stay in relation to which had been lifted by Beach J on 23 May 1995), issued bankruptcy notices against both Mr and Mrs Horvath. The Horvaths applied on 11 April 1996 to have those notices set aside, and for an extension of time within which to comply with them. The grounds relied upon by the Horvaths were as follows:
"The issue of service of the bankruptcy notice on Mrs Horvath:
that the bankruptcy notices were lodged by the Bank despite the matter still being heard in the Supreme Court;
that the Bank was trying to "claim twice for the same debt in 2 separate courts" that an appeal was pending in the Supreme Court in respect of the judgment against Horvath Junior."
40 The application to set aside the bankruptcy notices came before a Deputy District Registrar in this Court in the ordinary course of the conduct of the bankruptcy list. On 8 May 1996 that application was dismissed. On 15 May 1996 the Horvaths lodged an application for a review of that decision. The grounds relied upon were essentially the same as those argued before the Deputy District Registrar, namely, the adequacy of service of the bankruptcy notice upon Mrs Horvath, and that the bankruptcy notices, having been lodged by the Bank while an appeal had been pending in the Supreme Court in respect of the judgment against their son, were invalid.
41 The application for review of the decision by the Deputy District Registrar was heard on 29 May 1996 by Northrop J. His Honour dismissed that application. In his reasons for judgment, his Honour concluded that he was satisfied that proper service had been effected upon Mrs Horvath and that the judgment obtained in the Supreme Court had not been set aside. His Honour considered that the proceeding brought by Gabor Horvath Junior had not in any way affected the validity of the judgement obtained against his parents. In the course of his reasons for judgment, his Honour indicated that while he was conscious of the difficulties faced by litigants in person, and had made due allowance for those difficulties, there was no substance in any of the grounds relied upon.
42 To this point in the proceedings, the Horvaths appear to have believed that by reason of the appeal lodged by their son against O'Bryan J's decision in the Supreme Court, the whole of the judgment obtained by the Bank against them was unenforceable. Mr Horvath continues to labour under this misapprehension. He still relies upon the infancy of his son at the time of the execution of the mortgage as one of the bases upon which he contends that the default judgment obtained against both him and his wife is void. He fails to appreciate that the judgment obtained by the Bank against his son raises issues which are separate and distinct from the enforceability of that judgment against him and his wife. That judgment has never been set aside. It is plainly enforceable, whatever Mr Horvath may think.
43 Following the decision of Northrop J dismissing the application for review of the Deputy Registrar's decision not to set aside the bankruptcy notice, the Bank proceeded on 24 October 1996 with the filing of a Creditor's Petition. On 3 December 1996 the applicants/debtors filed a notice of intention to appear at the hearing of the petition. The grounds of opposition were:
"The "contract is void because it involves a minor";
the Bank is claiming on a "void contract in 2 separate courts";
Mr Horvath's denial of signing any loan application."
44 The first two grounds restate the matters which had been raised before Northrop J, and which had been dismissed by his Honour. The third ground appears to have been new. It raised for the first time as an issue in the proceedings the allegations of forgery which have, since that time, occupied Mr Horvath, the Bank, and the Court.
45 The Creditor's Petition was heard by Merkel J on 12 February 1997. His Honour dismissed each of the contentions advanced on behalf of the Horvaths, and made sequestration orders against them. It appears from his Honour's reasons for judgment that the main contention advanced by Mr Horvath as to why sequestration orders should not be made was the fact that the debt included a loan to the judgment debtors' son who was a minor at the time. Merkel J noted that the loan had been joint and several. Therefore, the outcome on appeal by the son, of any question of law that might be raised as to the loan having been made to a minor, would not affect the parents' liability to the Bank.
46 His Honour did not deal specifically with the assertion by Mr Horvath that he had not signed the relevant loan documentation. He stated, however, that he had considered the matters put by both Mr and Mrs Horvath, and that he was satisfied that there were no grounds which would warrant his looking behind the judgment, or exercising his discretion not to make the sequestration orders sought.
47 On 21 February 1997 the Horvaths filed a notice of appeal against the decision of Merkel J. The grounds of appeal were substantially the same as those upon which the Horvaths had previously relied. In lengthy submissions, the Horvaths claimed that it had always been their intention to purchase Lot 4. When they were later asked to consider purchasing Lot 5, rather than Lot 4, they had agreed to this proposal. They claimed, however, that the loan documents produced by the Bank had been altered to substitute Lot 5 for Lot 4 without their knowledge, or approval. They claimed that their signatures had been forged upon those documents, presumably by an officer of the Bank.
48 On 4 June 1997 a Full Court of this Court constituted by their Honours Ryan, Hill and Heerey JJ dismissed the Horvaths' appeal from the judgment of Merkel J. The judgment of the Full Court was delivered by Hill J. His Honour commenced by observing that Mr and Mrs Horvath were unrepresented, and that this might explain the difficulties the Court had in understanding the basis of their appeal. His Honour continued:
"In substance, however, it is either that the learned primary Judge should have gone behind the judgment debt on which the bankruptcy notice was based to see whether there was a real consideration for that judgment debt or, to the extent that he did, should have held that there was no such debt."
49 His Honour set out the already extensive history of the litigation between the parties, commencing with the proceedings before Master Wheeler, and tracing the matter through to the judgment of Northrop J. He noted that before Northrop J there had been two matters raised in support of the application to set aside the bankruptcy notice. The first concerned the question of service. The second, however, was that there was no true debt upon which the judgment was based.
50 Northrop J had recorded the argument advanced by Mr Horvath to have been that the continuation of the proceedings in the Supreme Court against the Horvaths' son was of such a nature as to vitiate, or to have some effect upon, the judgment obtained against the Horvaths. His Honour had correctly rejected that argument.
51 When the matter had come before Merkel J, the sole ground of opposition expressed in the petition proceedings related to the validity of the debt, having regard to the fact that the son was a minor. The case therefore put in the petition proceedings was the same as that which had been put in the proceedings to set aside the bankruptcy notice.
52 Hill J noted that Merkel J had given consideration to whether or not to exercise his discretion to look behind the default judgment relied upon by the judgment creditor, in accordance with the principles set out in Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137. Merkel J had also considered whether to exercise his discretion under s 52 of the Act to decline to make a sequestration order. His Honour had determined that there were no grounds for going behind the judgment, or for exercising his discretion not to make a sequestration order. Merkel J had found that the evidence showed that money had been advanced by the Bank to the Horvaths. No acceptable basis had been put to the Court as to why the total amount advanced was not owing.
53 Hill J then stated:
"Mr and Mrs Horvath now appeal to this Court. They have provided a lengthy written submission which seeks to assert, not on oath, matters of fact from which it is said the Court should conclude that it now should go behind the judgment debt."
54 His Honour then dealt with the principles governing the reception of fresh evidence in an appeal, and continued:
"To the extent therefore that the applicant seeks to have us consider fresh evidence, we would reject that course. We should, however, say that even if the matters raised in the written submissions were taken into account, they do not seem to lead to the conclusion either that there was no advance by the Bank or that the monies advanced were not repayable.
The matters raised, apart from the question of the infant son, concern a circumstance where the original agreement to purchase one lot was changed to an agreement to purchase another lot. There is some suggestion of forgery and a hint of a suggestion that the Bank had agreed to the loan being unsecured.
However, a mortgage appears to have been executed by Mr and Mrs Horvath as well as their son. It is now registered on the title of land purchased in their joint name with the aid of moneys provided by the Bank. Moreover Mr and Mrs Horvath concede that they agreed to accept Lot 5 in substitution for Lot 4, a certificate of title to Lot 5 issued in their names subject to a mortgage to the Bank and a building was later erected on Lot 5.
All of that occurred with the assistance of funds advanced by the Bank. However, it still remains the case that the material sought to be used by the applicants in their written submission was not material that was before the learned primary Judge nor was it on oath. The only real matter before the primary Judge as stated in the notice of opposition filed by Mr and Mrs Horvath was the question of the validity of the loan having regard to the fact that the son was a minor. For the reasons his Honour gives, the minority of the son could not affect the liability of Mr and Mrs Horvath, where that liability was not merely joint, but was also several. In these circumstances, the appeal should be dismissed with costs." (emphasis added)
55 Dissatisfied with the decision of the Full Court, the Horvaths elected to continue proceedings in the Supreme Court of Victoria. By summons dated 22 July 1997, Mr Horvath sought leave to file a defence and counterclaim against the Bank by which, inter alia, he and his wife claimed damages in an amount of $451,853.00 plus $30 million for general compensation. That application was heard on 28 July 1997 by McDonald J. In substance, the Horvaths relied upon the same matters as had been agitated before the Full Court of the Federal Court. On 29 July 1997 his Honour dismissed the summons.
56 By summons filed on 23 December 1997, Mr Horvath sought various orders in the Supreme Court of Victoria, including an end to his, and his wife's, bankruptcy, and a claim to compensation from the Bank in the sum of $30 million. His application was heard by Beach J on 7 January 1998. It raised essentially the same matters as Mr Horvath had previously relied upon before the Full Court of the Federal Court, and before McDonald J. Beach J dismissed the application. His Honour ordered that Mr Horvath not file any further documents in the Supreme Court proceedings without the leave of a judge.
57 The Horvaths then returned to the Federal Court. On 19 January 1998, they filed by way of "appeal" an application seeking the following:
"1. Grant leave for 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 documents needed."
58 This application was heard by Finkelstein J on 21 January 1998. His Honour dismissed the application. In his reasons for judgment, his Honour stated:
"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 … 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: …
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."
59 The next step taken by the Horvaths in the course of their own proceedings against the Bank appears to have occurred on 11 September 1998. On that date they lodged an application, purportedly under s 178 of the Act, naming not the Bank, but their trustee in bankruptcy, as respondent.
60 Section 178 provides:
"If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable."
61 The application purported to be an appeal against a decision of the trustee. The grounds relied upon by the applicants included the following:
"1. The trustee refused to call a creditor meeting for Division 1 - Proof of Debts under section 82, 83, 84. "Reason: it is not his duty to prosecute the CBA.".
…
2. 84(5) The Creditor CBA Solicitors lodges with the Court a statutory declaration verifying the matters contained in the proof of debt of such of those matters as are specified in the notice …. If they failed, they will be prosecuted under Part XIV Offences section 263 or 263A or 263B." (sic)
62 In addition, Mr Horvath issued a number of subpoenas against various persons requiring the production of documents. He sought orders compelling the filing of statutory declarations verifying the matters set out in the Bank's original proof of debt. This application was heard by Marshall J on 12 October 1998. His Honour set aside the subpoenas, and dismissed the application.
63 Undaunted, and undeterred, Mr Horvath persisted. On 23 October 1998 he filed an application purportedly under s 99 of the Bankruptcy Act. That section provides as follows:
"99. (1) Where a creditor or the bankrupt considers that, by virtue of a decision of the trustee under subsection 102(1), (3) or (4), a proof of debt has been wrongly admitted, he or she may apply to the Court for an order that the proof be expunged or that the amount of the admitted debt be reduced, and the Court may make an order accordingly.
(2) Notice of an application under subsection (1) shall be given, in accordance with the rules of court, to the creditor by whom the proof of debt was lodged.
(3) The costs in relation to an application under subsection (1) are in the discretion of the Court.
(4) Where the Court makes an order under this section that a proof of debt be expunged or that the amount of an admitted debt be reduced, the person who proved the debt shall forthwith repay to the trustee any amount received by way of dividend in respect of the expunged proof of debt or any amount received by way of dividend in excess of the amount that he or she would have been entitled to receive if his or her debt had been originally admitted for the reduced amount, as the case requires."
64 This application was supported by extensive affidavit material. Subpoenas similar to those which had been set aside by Marshall J on 12 October 1998 were also issued. Because the application brought under s 99 of the Act was substantially similar to that previously brought under s 178 of the Act which had been dealt with, and disposed of, by Marshall J on 12 October 1998, a Registrar of this Court referred the matter to his Honour who happened coincidentally to be the duty judge at that time.
65 Marshall J gave directions on 23 October 1998 pursuant to O 46 r 7A of the Federal Court Rules. That rule provides:
"Abuse of process
7A. If a document presented to a Registrar in any proceeding, including any document which is or will if issued become an originating document, appears to a Registrar on its face to be an abuse of the process of the Court or to be frivolous or vexatious, the Registrar may refuse to accept or issue it or may seek the direction of a Judge who may direct him-
(a) to accept or issue it; or
(b) to refuse to accept or issue it; or
(c) to refuse to accept or issue it without the leave of a Judge first had and obtained."
66 Mr Horvath was informed of the orders made by his Honour. That led him to seek the leave of a Judge to proceed with his application. That application for leave came before me, as duty judge, on 30 October 1998.
67 Prior to my hearing that application, the Horvaths had on 29 October 1998 again lodged separate applications pursuant to each of ss 178 and 99(1) of the Act. These applications were virtually identical in form. Mr Horvath then informed the Registry that he did not wish to proceed with the application for leave of a judge pursuant to the directions made by Marshall J on 23 October 1998, but rather with his new applications lodged on 29 October 1998. As before, the District Registrar referred the matter to me as the duty judge. On 29 October 1998 I made orders pursuant to O 46 r 7A and directed that the new applications lodged on 29 October 1998 be listed for hearing before me on the question of leave to file those applications at the same time as I dealt with the application for leave to proceed with the matter which Marshall J had earlier ordered required such leave.
68 When the hearing commenced before me on 30 October 1998 Mr Horvath indicated that the only issue he was now seeking to agitate was whether or not Merkel J had been correct in making sequestration orders against Mr Horvath and his wife. In his submissions before me, Mr Horvath claimed that the Bank had never filed any "proof" either in the Federal Court or in the Supreme Court. He denied that there had ever been a valid judgment against himself or his wife. He contended that what he was seeking to do was to file an application under s 52(1) of the Act so that "I can prove what they're asking, what they're stating, and they file a proof of debt, which is to me based on lies."
69 It soon became clear that what Mr Horvath was seeking to do was to raise again the very matters which he had previously raised, in one form or another, before Merkel J, before the Full Court of this Court, before Finkelstein J, and before Marshall J. I informed Mr Horvath at the outset that there were serious questions raised as to whether his application should be regarded as an abuse of the process of the Court.
70 In the course of the hearing, I put to Mr Horvath that the matters sought to be agitated in the application which he and his wife had lodged on 29 October 1998 had previously been dealt with by a number of judges of this Court, and that he had the burden of persuading me that there was some basis for the general assertions which he continually made from the bar table. Mr Horvath replied:
"Your Honour, this is it. I will have to come back for the next hundred years to say it, because the case is only the case what I am putting in. I cannot put it in any other. I can't understand it - the has to go behind the judgment. That means that the Bank can go in with a fraud and bankrupt me …"
71 I pointed out to Mr Horvath that the Full Court had already held that it was inappropriate to go behind the judgment debt in the circumstances of this case. I asked whether he had some new matter to raise. Mr Horvath replied:
"I cannot any new (sic). All I can raise is that's it, that's what they did, and if I file it in hundred times, its going to be ..."
72 When I reminded Mr Horvath that he had on a number of previous occasions come to this Court and informed a judge that the Bank had been involved in a fraud upon him, his response was "yes, but every time it was dismissed".
73 When I asked Mr Horvath whether he had anything further to add, his reply was:
"I still say it again, to give you this - again, last time, because next week I try to come back again I will file relief… Your Honour, the Court gives me no other way. I have to come back. I have to prove I'm right or they have to come in with the proof of debt and prove that I am wrong."
74 In my reasons for judgment refusing leave to proceed upon the applications of 29 October 1998 I stated:
"…the applicants' claims as presently formulated, are clearly foredoomed to fail. Taken at their highest for the applicants, they certainly do not raise any serious question to be tried. The material which the applicants have filed in support of their applications is sparse, and does not condescend to particularity. Essentially that material calls upon the Bank to substantiate its proof of debt, and makes sweeping and general assertions of the Bank's complicity in a fraud against the applicants. Nothing has been put before me which would justify interfering with the trustee's decision to admit the Bank's proof of debt. No error has been identified in the approach taken by the trustee to the performance of his duties beyond the assertion, which the applicants have repeated for years, that they were the victims of a fraud by the Bank."
75 On 6 November 1998, the Horvaths filed a notice of motion seeking leave to file an application seeking an order pursuant to s 99 of the Act that a proof of debt lodged by the Bank had been wrongly admitted. At the time that this notice of motion was filed, the applicants did not in fact require the leave of a judge to file an application seeking orders pursuant to s 99 of the Act. It would appear, however, that having regard to the earlier proceedings in this Court, they believed that such leave was necessary. The Registrar referred the notice of motion to Goldberg J who was then the duty judge. His Honour directed that the Registrar refuse to accept or issue the motion without the leave of a judge first had and obtained pursuant to O 46 r 7A. Not surprisingly, perhaps, the grounds relied upon by Mr Horvath were identical to those agitated before me in the previous application which I had dismissed.
76 Before Goldberg J, Mr Horvath advanced essentially the same contentions as had been previously advanced before me. In response to a question from Goldberg J as to "whether the matter before me was the same matter as had been before Weinberg J", Mr Horvath replied "it can only be the same issue; the issue will not change, whether I owe the Bank money is always the issue".
77 Goldberg J, on 10 November 1998, in dismissing the notice of motion, concluded that:
"Leave to file should be refused. It is an abuse of the process of the Court. It raises, and is based upon, issues which have already been determined by the Court adversely to the applicants. It is, in short, a reiteration or re-run of earlier proceedings which have been held to be without merit."
78 The Horvaths then returned to the Supreme Court of Victoria. By summons filed on 16 November 1998, they brought an application against the Bank returnable on 25 November 1998 seeking orders that the default judgment entered against them on 24 February 1995 be set aside. That application was dismissed by Master Evans on 25 November 1998.
79 By summons filed on 24 November 1998 the Horvaths again filed an application seeking orders that the default judgment entered against them on 24 February 1995 be set aside. The return date for that application was 30 November 1998. On that date, Beach J heard the application. It was dismissed.
80 Finally, and for the sake of completeness, it should be not be thought that Gabor Horvath Junior's dispute with the Bank has been resolved. It will be recalled that the Bank had successfully obtained judgment against Gabor Horvath Junior as a result of the orders made by O'Bryan J on 2 April 1996.
81 On 11 June 1997, the Bank issued a bankruptcy notice against Gabor Horvath Junior. He failed to comply within the requirements of that notice within the prescribed time subsequent to service. He was therefore deemed to have committed an act of bankruptcy. The Bank proceeded on 25 February 1998 to file a creditor's petition against him. On 7 December 1998 he filed a notice of intention to oppose that petition. Not surprisingly, the grounds relied upon include the very same matters concerning the alleged forgery on the part of the Bank as the Horvaths have agitated for some years.
82 It is clear that Mr Horvath has played an active role throughout the conduct of his son's case against the Bank - the submissions relied upon by the son are identical in all respects to those advanced by the father. Moreover, Mr Gabor Horvath Senior has represented his son (as well as his wife) throughout all of the proceedings brought by and against his son.