Horvath, Gabor & Anor Ex Parte Commonwealth Bank of Australia

[1997] FCA 187

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF
THE STATE OF VICTORIA

No VP 990 of 1996

BETWEEN:

GABOR (SNR) HORVATH and AGOTA HORVATH
             ex parte: COMMONWEALTH BANK OF AUSTRALIA

COURT:Merkel J

DATE:12 February 1997

PLACE:Melbourne

EX TEMPORE REASONS FOR JUDGMENT

HIS HONOUR:   In this matter the Commonwealth Bank of Australia is petitioning for the bankruptcy of two judgment debtors, Mr Gabor Horvath and Mrs Agota Horvath.  The debt arises out of a loan made by the bank to the two judgment debtors and their son who, it appears, was under age or a minor at the time the debt was incurred.  The bank brought proceedings in the Supreme Court of Victoria to recover the debt.  The result of the proceedings was that judgment was entered against the judgment debtors and a stay of proceedings on that judgment, which was granted by the Master, was set aside after a contested hearing before Beach J in the Supreme Court.

Beach J, in his reasons, indicated that:

•he was satisfied that there were grounds for an arguable defence by the son, because he was a minor;

•there were no such grounds nor was there an arguable defence for the parents being the judgment debtors;

•There were no circumstances that would justify a stay of the judgment against the judgment debtors.

As a consequence of the judgment a bankruptcy notice was duly served and an application was made by the debtors to set it aside.  The matter came on for hearing before Northrop J in this Court.  His Honour declined to set aside the bankruptcy notice and in the course of giving reasons referred to the fact that the judgment debtors were seeking to challenge the underlying judgment debt.

His Honour had been told that there was an appeal pending in relation to the judgment given at trial against the son and that the judgment debtors contended that the judgment debt against them was not a proper one on the basis that the transaction, being void against the son, was also void against themselves.  His Honour said in his reasons for judgment that the judgment against the judgment debtors is still in existence and must be acted upon as such until it is set aside. His Honour concluded that as the bank's petition was based upon the judgment debt the application to set aside the bankruptcy notice must fail.  His Honour added that the:

application to have the bankruptcy notice set aside or time for its compliance extended is not the end of the story.  If the bank determines to proceed with the petition the matters can be raised at the hearing of the petition.

His Honour went on:

It is always difficult in cases of this kind where a debtor appears in person in an area where legal advice is of great importance.  If opposition is to be taken to any petition particularly in regard to the bankruptcy notice it is important that the opposition be supported by affidavit setting out in a clear manner what are the facts which the debtors say are relevant for the purposes of determining the matter.

The bank subsequently issued its petition based on the judgment debt and the judgment debtors have filed material in this Court seeking to have the Court go behind the judgment.  The primary basis on which that matter is put to the Court is again that the debt included a loan to the judgment debtors' son who is a minor and that that loan, although upheld, as against the son at the final hearing before O'Bryan J in the Supreme Court, is currently the subject of an appeal to the Court of Appeal. 

On the material before me the only evidence I have is that the loan was a joint and several loan. The outcome, on appeal by the son, of any question of law that might be raised as to the loan being a joint loan, will not affect the parent's liability to the bank. The documentation of
the bank in relation to the loan (exhibit 9 to the affidavit of Mr Horvath) provides that if there is more than one borrower the liability will be joint and several. That has the consequence, in law, that if the loan is void against the son (which is yet to be found in the Supreme Court, but is the subject of the appeal) it does not exculpate Mr or Mrs Horvath from liability under it or under the judgment against them.

I do have a discretion to look behind the judgment in accordance with the principles set out in Ahern v The Deputy Commissioner of Taxation (1987) 76 ALR 137 at 147-8. I also have a very broad discretion under section 52 of the Act to not make a sequestration order. I have considered the matters put by both Mr and Mrs Horvath and am satisfied that there are no grounds which would warrant my looking behind the judgment or exercising the discretion that I have to not make the sequestration orders that have been sought.

The affidavits that have been filed in accordance with the Act show that the amount that is still outstanding pursuant to the judgment debt as at 12 February 1997 is the sum of $200,375.07.  No acceptable basis has been put to the Court as to why that amount is not owing pursuant to the judgment. Further, no other basis has been put which satisfies me that I should exercise my discretion under section 52 in favour of the judgment debtors.

In these circumstances I am satisfied that the debtors have committed the acts of bankruptcy alleged in the petition of the petitioning creditor.  I am also satisfied as to the proof of the other matters of which subsection 52(1) of the Act requires proof. 

I order that the estates of the debtors, Gabor Horvath Senior and Agota Horvath be sequestrated.  I order that the petitioning creditor's costs including reserved costs be taxed and paid in accordance with the Act.

I certify that this and the preceding 4 pages are a true copy of the revised Reasons for Judgment of the Honourable Mr. Justice Merkel.

Associate:

Date:

Appearances:  G. & A. Horvath appeared in person.

Heard:12 February 1997.