McKenzie & Anor v Horvath Snr [2002] FMCA 199 (26 August 2002)

Last Updated: 5 September 2002

FEDERAL MAGISTRATES COURT OF AUSTRALIA

McKENZIE & ANOR v HORVATH SNR

[2002] FMCA 199

BANKRUPTCY - Setting aside bankruptcy notice - no judgment - bankruptcy notice should not have been issued.

Federal Magistrates Court Rules 2001

Bankruptcy Act 1966

Applicants:

GREGORY McKENZIE & ANOR

Respondent:

GABOR HORVATH SENIOR

File No:

MZ 818 of 2002

Delivered on:

26 August 2002

Delivered at:

Melbourne

Hearing Date:

26 August 2002

Judgment of:

Phipps FM

REPRESENTATION

Counsel for the Applicant:

Mr D.J. Christie

Solicitors for the Applicant:

Landers & Rogers

Respondent:

In person

ORDERS

(1) Insofar as it is necessary, the time for compliance with bankruptcy notice number BN 1097 of 2002 the Applicants Messrs Gregory James McKenzie and Stephen John Mackie disputing the validity of the bankruptcy notice the subject of this Application on the ground that no judgment or order on which to found the issue of the bankruptcy notice exists be extended to and include this day 26 August 2002 being the date of the making of these orders.

(2) The bankruptcy notice extended by order number 1 hereof being notice BN 1097 of 2002 and dated 26 July 2002 against Messrs Gregory James McKenzie and Stephen John Mackie be set aside.

(3) That the Respondent pay the costs of and incidental of the Applicants to this Application to be taxed on a solicitor-client basis, including any reserved costs.

(4) Certify for counsel.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE

MZ 818 of 2002

GREGORY McKENZIE & ANOR

Applicants

And

GABOR HORVATH SENIOR

Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an Application to set aside a bankruptcy notice. The bankruptcy notice was issued by the official receiver to the Applicant on 26 July 2002. The first Applicant is a partner in the firm of Lander and Rogers and the second Applicant was previously a lawyer employed in that firm. There is a long history of litigation between the Respondent, the Commonwealth Bank of Australia, the firm of Lander and Rogers and partners and employees and the Respondent's trustee in bankruptcy.

2. This Notice of Motion has perhaps not been served upon the Applicants, but notwithstanding that, they have made Application to set it aside. The bankruptcy notice was purportedly issued pursuant to section 41(1) of the Bankruptcy Act 1966 which provides an official receiver may issue a bankruptcy notice on the Application of a creditor who has obtained against a debtor a final judgment or final order that:

a) is described in paragraph section 40(I)(g);

b) is for an amount of at least $2000.

3. Section 40(I)(g) provides:

If a creditor who has obtained against the debtor a final judgment or final order being a judgment or order the execution of which has not been stayed has served on the debtor in Australia or by leave of the Court elsewhere a bankruptcy notice under this act and the debtor does not:

(i) where the notice was served in Australia-within the time specified or in the notice; or

(ii) where the notice was served elsewhere-within the time fixed for the purpose by the order giving leave to affect the service;

(iii) comply with the requirements of the notice or satisfy the Court that he or she has a counterclaim, set-off or cross-demand equal to or exceeding the amount of the judgment debt or sum payable under the final order or, as the case may be, being a counterclaim, set-off or cross-demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained, and in those circumstances the debtor will have committed an act of bankruptcy under section 40(1).

4. The background to this Application so far as relevant is that on 9 August 2001 Ashley J in the Supreme Court of Victoria declared the Respondent a vexatious litigant and declared that he not without the leave of the Supreme Court, an inferior Court or tribunal constituted or presided over by a person who is a barrister or solicitor of the Court continue or commence any legal proceedings in the Court, inferior Court or tribunal against a number of persons, most of whom were associated with the Commonwealth Bank. Then on 3 December 2001 Beach J made a similar order relating to Lander and Rogers and the Applicants in this case.

5. On 12 February 1997 Weinberg J in the Federal Court of Australia ordered, amongst other things, that the Respondent in this case and Mrs Agotta Horvath:

Shall not without leave of the Court institute in this Court any proceeding against Mr Paul A. Patterson, their trustee in bankruptcy or against the Commonwealth Bank of Australia other than an appeal against this order.

6. Then on 15 July 2002 Hartnett FM in this Court in a proceeding in which the Respondent was the Applicant and the Applicants were the Respondents ordered, amongst other things:

Pursuant to rule 13.11(1)(b) of the Federal Magistrates Court Rules 2001, Mr Gabor Horvath Senior shall not without leave of the Court institute in this Court any proceedings other than an appeal against the orders made this day in proceedings numbered 472 of 2002 and 420 of 2002.

7. That order was made by Her Honour in proceeding number MZ 427 of 2002. In proceeding number 420 of 2002 on the same day Her Honour made an order that a bankruptcy notice number BN53302 dated 15 April 2002 against the Applicants in this proceeding be set aside. That was a bankruptcy notice which had been issued at the instance of the Respondent.

8. The bankruptcy notice claims a debt of $35,250,000. It refers to a final judgment on 3 December 2001 in the Supreme Court of Victoria. In fact, there is no judgment. The proceeding dealt with on 3 December 2001 was one against the Respondent, the Applicants and others. The proceedings were before Beach J. That was a day on which His Honour dismissed the proceedings (commenced by writ on

10 October 2002) and ordered that the Respondent not without leave of the Court institute in the Court any proceedings against Lander and Rogers, Gregory James McKenzie or Stephen John Mackie.

9. There is reference to another judgment of Beach J on 23 May 1995 that made orders in favour of the Commonwealth Bank against the Respondent.

10. There are a variety of reasons why this bankruptcy notice should be set aside, but the obvious and straightforward one is that the Respondent does not have a judgment in his favour against the Applicants for $35,250,000 or any other amount. Nor amongst all of the material that has been filed can there be any suggestion of any act of bankruptcy by the Applicants in relation to the Respondent. In those circumstances the bankruptcy notice must be set aside and that is what I order.

11. The Respondent has handed to me a document headed Form 27 Notice of Motion in which he seeks against the Applicants an order pursuant to section 277 of the Bankruptcy Act 1966 that Lander and Rogers be punished for an offence, that a warrant be issued and that Lander and Rogers be indicted. Mr Horvath, the Respondent, has told me that the registry refused to issue it. He sought to have me issue it. Mr Christie, who appeared for the Applicants, brought Hartnett FM's order of

15 July 2002 restraining the Respondent from bringing proceedings in this Court without leave of the Court first obtained to my attention. The Respondent's argument then was that he was not seeking to bring fresh proceedings. It is the Applicants who have brought the proceedings and he was merely making an Application within that proceeding. That is not correct. Whatever the merits of the Notice of Motion which the Respondent seeks to bring before the Court, it is not in any way related to the Application before the Court. It is not a proceeding within that Application. Therefore there is nothing before the Court for me to deal with. If the Respondent does seek to bring any such Application as is referred to in the Notice of Motion he will have to comply with Hartnett FM's order of 15 July 2002.

12. The order of the Court therefore is that the bankruptcy notice issued against the Applicants Gregory James McKenzie and Stephen John Mackie on 26 July 2002 is set aside. The bankruptcy notice in virtually similar terms was set aside by Hartnett FM in this Court on 15 July 2002. There was no basis at all for this bankruptcy notice and indeed my view is that the Official Receiver should not have issued it. Section 41(1) has as a necessary precondition to it that a final judgment obtained against the alleged debtor. A very simple perusal of this bankruptcy notice would have shown that there was no judgment. This is a clear case for an order for solicitor client costs.

13. I should remark on one thing. The Respondent has said that this Application should have been heard before Hartnett FM. This Application has been heard by me in accordance with the normal administrative procedures within this Court which is that on each Monday there is a Federal Magistrate available to hear matters referred from the Registrar's list heard on that day. The normal procedures of this Court have rostered me for that task on this day and therefore that is why I have heard this Application.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Phipps FM

Associate:

Date: