FEDERAL COURT OF AUSTRALIA Foyster v ANZ Banking Group Ltd [1999] FCA 1043 BANKRUPTCY – application to set aside a bankruptcy notice – whether debtor has counter-claim, set-off or cross-demand – prior administration of debtor's estate under Pt X Bankruptcy Act 1966 – relevance of s86 Bankruptcy Act to debtor's cross-demand – separate cross-demand against creditor in conversion – whether property founding action in conversion of a value exceeding the debt owing under bankruptcy notice – whether claim in conversion made in good faith Bankruptcy Act 1966 (Cth), s40(1)(g), s86, s243 Ebert v Union Trustees Co of Australia (1960) 104 CLR 346, cited Gye v McIntyre (1991) 171 CLR 609, cited Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR(NSW) 700, cited LLOYD FOYSTER v ANZ BANKING GROUP LTD N7702 OF 1999 EMMETT J 27 JULY 1999 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N7702 OF 1999 BETWEEN: LLOYD FOYSTER Applicant AND: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) Respondent JUDGE: EMMETT J DATE OF ORDER: 27 JULY 1999 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application be dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N7702 OF 1999 BETWEEN: LLOYD FOYSTER Applicant AND: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) Respondent JUDGE: EMMETT J DATE: 27 JULY 1999 PLACE: SYDNEY EX TEMPORE REASONS FOR JUDGMENT (NO. 2) 1 I have before me an application by Lloyd Foyster ("the Debtor") to set aside a bankruptcy notice, numbered NN1924 of 1998 ("the Bankruptcy Notice"), served on the Debtor at the behest of Australia and New Zealand Banking Group Limited ("the Bank"). The Bankruptcy Notice, by reason of an order made by a Registrar on 17 May 1999, was deemed to be served on the Debtor on 7 June 1999. The ground on which the Debtor seeks to have the Bankruptcy Notice set aside is that contemplated by sections 40(1)(g) and 41(7) of the Bankruptcy Act 1966 (Cth) ("the Act"). 2 Under section 40(1)(g), a debtor commits an act of bankruptcy if a creditor, who has obtained against the debtor a final judgment or final order, has served on the debtor a bankruptcy notice, and the debtor does not, within the time specified in the notice, either comply with the requirements of the notice, or satisfy the Court that he has a counter-claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, that he could not have set up in the action or proceeding in which the judgment or order was obtained. 3 I have earlier in the day, in ruling on the admissibility of evidence, indicated my view as to the inter-relationship between section 41(7) and section 40(1)(g) – see Foyster v ANZ Banking Group Ltd [1999] FCA 1032. The question which is now posed for the Court is whether the Court should be satisfied that the Debtor has a counter-claim, set-off or cross-demand equal to or exceeding the amount of the sum payable under a final order of the Supreme Court of New South Wales obtained by the Bank against the Debtor in the circumstances to which I shall refer, and which is the subject of the Bankruptcy Notice. 4 Not every claim by a debtor will suffice. A claim made in bad faith would not be good enough. A claim must be more than bona fide. The debtor must satisfy the Court that he or she has a genuine claim. The Court must be satisfied that it has a reasonable probability of success. The standard may be expressed by saying that the debtor must show that he has a prima facie case, even if, then and there, he or she does not adduce the admissible evidence which would make out a prima facie case before a court trying the issues that are involved in the counter-claim, set-off or cross-demand - see Ebert v Union Trustee Company of Australia Ltd (1960) 104 CLR 346 at 350. 5 There has been considerable litigation between the Debtor and the Bank. It has been summarised in reasons for judgment of Hidden J of the Supreme Court of New South Wales delivered on 10 May 1999 in proceedings 21004/95. In the proceedings before Hidden J, allegations of negligence and fraud were made by the Debtor against the Bank, arising out of borrowings from the Bank in Swiss francs in 1985 by Country Properties Pty Ltd ("the Company"), which was associated with the Debtor. The Debtor's case was that the manager of the Bank advised him that the Company should take an advance in Swiss francs, rather than in Australian dollars. The Bank sought an order that the proceedings be summarily dismissed or permanently stayed. The Debtor, in turn, sought leave to file an Amended Statement of Claim, making separate allegations of negligence and fraud on the part of the Bank in relation to further borrowings effected by the Company in 1989. 6 In 1990, the Company had commenced proceedings against the Bank in the Commercial Division of the Supreme Court seeking damages for what was said to be negligent advice by the Bank in connection with the loan in Swiss francs. Those proceedings were subsequently transferred to the Common Law Division as proceedings 11620/91. However, on 14 April 1993, they were dismissed, pursuant to the Rules of the Supreme Court, because of failure by the Company to provide a verified statement in answer to interrogatories. 7 On 17 June 1991, the Debtor resigned as a director of the Company and, on the following day, he commenced proceedings in his own name against the Bank (proceedings 13286/91). In those proceedings, the Debtor sought damages from the Bank for alleged negligence in connection with the Swiss francs loan and an order setting aside the guarantee which he gave in respect of the loan. 8 However, on 19 December 1991, the Debtor entered into a deed of assignment under Part X of the Act pursuant to a special resolution of creditors on 17 December 1991. By the Deed of Assignment, the Debtor conveyed and assigned to his trustee, John Duncan Green ("the Trustee"), all his divisible property within the meaning of Part X of the Act. The Bank lodged a proof of debt in the administration under Part X, claiming the sum of $10,863,022. The Debtor, in his Statement of Claim in the proceedings before Hidden J, asserted that he was indebted to the Bank in the sum of $10,547,829, as at 19 December 1991. The administration under Part X appears to have proceeded on the basis that the proof in the sum of approximately $10 million was accepted by the Trustee. 9 On 26 October 1992, the Trustee issued a certificate, pursuant to section 232 of the Act, that the Debtor's divisible property had been realised and the final dividends had been paid to creditors. As I shall indicate shortly, much turns on the effect of the Act in relation to that administration. 10 As I have said, on 18 June 1991, the Debtor had commenced proceedings 13286/91 against the Bank. Under section 60(2) of the Act: "An action commenced by a person who later becomes bankrupt is […] stayed until the trustee makes election to prosecute or discontinue the action". Section 60(3) enables the defendant to such an action to serve notice of the action upon the trustee and, unless the trustee makes an election under section 60(2) within 28 days thereafter, he or she is deemed to have abandoned the action. 11 On 2 July 1993, the Bank served a notice under section 60(3) upon the Trustee in respect of proceeding 13286/91. No election was made by the Trustee within the prescribed period. Accordingly, the proceedings were deemed to have been abandoned on and after 31 July 1993. 12 However, in the meantime, on 6 July 1993, the Debtor offered to purchase from the Trustee certain assets of the Debtor including: "[a]n action filed in the Supreme Court of NSW, Sydney Registry, Common Law Division No. 13286 of 1991, and that the defendant in the matter is the Australia and New Zealand Banking Group". 13 The Debtor offered to pay $500 for those assets. The Trustee acknowledged receipt of the sum of $500 "for the above mentioned assets". No deed of assignment appears to have been executed. However, on 19 November 1993, a Deed of Confirmation was entered into between the Trustee and the Debtor. The operative part of that deed was as follows: "The agreement dated 6 July 1993 between Messrs Green and Foyster always intended that the assignment should include and assignment of all those rights in, title to, and causes of action relating to, or in any way arising out of the dealings between Mr Foyster and the bank in the period 1986 to 26 October 1992, including the matters raised in the District Court of New South Wales proceeding No. 5096 of 1991, including any amendments to either or both proceedings from time to time and also the matters now raised in the proposed Amended Statement of Claim in the proceedings which is Annexure A to the Notice of Motion dated 17 September 1993 in these proceedings." 14 On 26 April 1994, an order was made by a Master of the Supreme Court that the statement of claim in proceedings 13286/91 be struck out. An appeal against that decision was dismissed on 14 May 1997. An order for costs was made in favour of the Bank against the Debtor in connection with that summary dismissal. The order for the payment of costs is the order upon which the Bankruptcy Notice is founded. There is, therefore, no basis for contending that the Debtor is not indebted to the Bank in respect of that order. 15 However, the Debtor claims to have a counter-claim, set-off or cross-demand that exceeds the amount of the order for costs. When the proceedings first came before me, the counter-claim, set-off or cross-demand relied on by the Debtor was said to be that articulated in the proposed Amended Statement of Claim sought to be filed in proceeding 21004/95. Those proceedings were commenced in October 1995, although the original statement of claim was not served until October 1997 after the appeal from that dismissal of proceedings 13286/91 had itself been dismissed. The original statement of claim was served on the last day permitted by the Rules. 16 On 1 November 1996, the Debtor filed yet another statement of claim in the Supreme Court in proceedings 21219/96. It made allegations similar to those made in proceedings 13286/91 which had been dismissed, although it also made additional allegations to which I shall refer later. Proceedings 21219/96 were summarily dismissed by a Master of the Supreme Court on 8 December 1997. 17 In the Supreme Court proceedings which are still current, namely 21004/95, claims are made in respect of two sets of transactions involving the Bank. The claims are articulated in the proposed Amended Statement of Claim. 18 The first set of dealings may be summarised as follows: · The Bank advised and represented to the Debtor that he should not borrow in Australian dollars, as his and the Company's financial interest over the next five years would be substantially better served if the borrowing was to be made in Swiss francs, and that, instead of borrowing the sum of A$950,000, the borrowings should be increased to the equivalent of A$1,500,000 in Swiss francs. That representation was particularised as including the following representations alleged to have been made to the Debtor by Mr McMaster, a branch manager of the Bank: (a) Swiss francs were a far more stable currency than the Australian dollar and the only risk related to the Swiss franc devaluing against the Australian dollar. (b) In borrowing in Swiss francs, there would be no need to concern about the state of the Australian economy, nor fluctuations in the exchange rate of the Australian dollar (c) It was in the interest and financial advantage of the Debtor and the Company to replace all existing borrowing held with the Bank in Swiss francs and that the Company should borrow additional funds which, when invested, would earn sufficient interest to enable the Debtor and the Company to partially discharge liabilities for interest on the Swiss francs (d) It was in the Debtor and Company's interest to borrow at the existing exchange rate and that the loan should be taken as long as practicable. · Acting on the Bank's representations, the Debtor agreed to borrow the equivalent of A$1,500,000 in Swiss francs and, accordingly, executed a security and guarantee document as required by the Bank. (I interpose that, in fact, the borrowing was by the Company, although the Debtor guaranteed the indebtedness of the Company to the Bank.) · The Bank made the representation to the Debtor in reckless disregard or care [sic] as to the accuracy of such representation with the intention of inducing the Debtor and the Company to convert existing borrowings and to take additional borrowings in Swiss francs and, in the circumstances, the actions of the Bank amounted to fraudulent misrepresentation. · As a result of the Bank's negligence and acting upon the representations, the Debtor and the Company suffered loss and damage estimated to be $2.5 million. 19 The second set of dealings which are the subject of the proposed Statement of Claim may be summarised as follows: · On or about September 1989, at the invitation of the Bank, the Debtor made a loan application which was approved by the Bank on 19 September 1989, after it had commissioned a valuation of the Company's property. · In reliance upon the valuation, the Debtor and the Company accepted the Bank's offer of 19 September 1989 and the Bank then lent to the Debtor and to the Company a total of $8 million, out of which it discharged the total amount that was owing under the foreign currency loan. · In reliance upon the valuation, members of the Debtor's family offered to purchase shares in the Company to the total value of $3 million which the Bank unreasonably refused. · The Bank's refusal was unreasonable and unconscionable and constituted conduct in contravention of section 51AA of the Trade Practices Act 1974 (Cth). · In further reliance upon the valuation, the Debtor's family advanced the Debtor the sum of $1 million. · In further reliance on the valuation, the Debtor granted the Bank additional securities. · The Bank's valuation of the Company's property and financial forecasts were a gross overestimate of the real market value and feasibility of the venture which in the circumstances was well known to the Bank. · The Bank was well aware that the valuation represented an inflated valuation which was consciously obtained by the Bank with the specific design of inducing in the Debtor's mind the abundance of securities such that he would execute all security documentation required by the Bank. In the circumstances, the actions of the Bank amounted to fraudulent misrepresentation. · The Debtor suffered financial damage in the sum of $10 million. All of the damage, insofar as it is particularised, was alleged to have been suffered prior to 1991. 20 There are two bases upon which the Bank resists reliance by the Debtor upon the counter-claims articulated in proceedings 21004 of 1995. In the light of the view which I have formed, I need to deal with only one of those. However, I shall mention the others briefly. 21 First, it is said that the evidence in support of the Debtor's claim is inadequate. The only evidence of the alleged counter-claim is the proposed Amended Statement of Claim in the proceedings before Hidden J which has been verified by the Debtor. The mere production of a statement of claim is not evidence and is insufficient unless supported by prima facie evidence. I would not regard verification of a statement of claim as prima facie evidence. 22 Second, the Bank contends that there is significant exaggeration in the claims for damages made in the proposed Amended Statement of Claim, having regard to the quantum alleged in the original Statement of Claim filed in the proceedings. That inference is almost irresistible in the absence of any evidence at all giving any substance to the claims. Such circumstances bear on the good faith of the claims. 23 Third, there are questions of pleading. While the first allegation made in the Amended Statement of Claim is not expressed as felicitously as it might be, it is possible to find some allegation of a representation of fact. So far as the second claim is concerned, there is real difficulty in determining the precise nature of the loss alleged to have been suffered. The conduct induced by the alleged representation constituted by the valuation was to borrow money. That money was applied, at least in part, in reducing a liability. There is simply no evidence as to what happened to the balance of the funds, but it is clear that the Company or the Debtor received an advance of $8 million so far as the allegation in the amended Statement of Claim is concerned. 24 I do not, on the basis of the claim as it is presently formulated, see just what damage is alleged to have been suffered by reason of the borrowing of the money from the Bank. Assuming that it could be established that a grossly overestimated valuation was consciously obtained by the Bank with the specific design of inducing the Debtor to execute securities, it is not suggested that the security was given for a liability which was not otherwise there. It may be that what is behind the allegation is a suggestion that the Debtor would not have guaranteed the indebtedness of the Company had he not been induced to believe that the Company's assets would be adequate to meet any liability to the Bank. That is difficult to find in the claim as formulated, although it may be that it is capable of being construed in that way. 25 The answer, however, to the claim based on Supreme Court proceedings, 21004/95, is to be found in the effect of section 86 of the Act. The Debtor claims to be entitled to maintain the proceedings in the Supreme Court by reason of the arrangement of 6 July 1993, referred to above. There appears to be some question as to the effectiveness of the assignment because the Debtor has commenced further proceedings in the Equity Division of the Supreme Court, seeking rectification of a "deed of assignment" of 6 July 1993. That claim appears at the moment to be misconceived, because there was no deed of assignment of 6 July 1993. I shall assume for present purposes, however, that the instruments variously entered into, to which I have referred above, were effective to vest in the Debtor any claim which he may have had against the Bank as at the date of the deed of assignment to the Trustee. It is common ground that, if the Debtor did have any claim, such as is alleged in the Supreme Court proceedings, that claim was the subject of the deed of assignment in favour of the Trustee. 26 Section 86 of the Act relevantly provides as follows: "[W]here there have been mutual credits, mutual debts or other mutual dealings between a person who has become a bankrupt and a person claiming to prove a debt in the bankruptcy (a) an account shall be taken of what is due from the one party to the other in respect of those mutual dealings; (b) the sum due from the one party shall be set off against any sum due from the other party, and (c) only the balance of the account may be claimed in the bankruptcy, or is payable to the trustee in bankruptcy, as the case may be." 27 Section 243 of the Act relevantly provides that section 86 will apply with prescribed modifications, if any, in relation to a composition under Part X as if: "(a) a sequestration order had been made against the debtor on the day on which the special resolution accepting the composition was passed, and (b) the trustee of the composition were the trustee in his or her bankruptcy." It is not necessary to consider the effect, if any, which any prescribed modifications may have. 28 The Bank contends that the effect of section 86 in the present case is that, following the passing of the special resolution of creditors in respect of the estate of the Debtor, an account must be taken of what is due from the Debtor to the Bank in respect of "any mutual credits, mutual debts or other mutual dealings" between them, and that only the balance of the account may be claimed in the Part X administration, or is payable to the trustee in the Part X administration, as the case may be. The Bank contends that, even if there was a claim of $10 million which the Debtor had against the Bank as at the relevant date, the taking of accounts would require that the whole of the claim of $10 million be set off against the debt due to the Bank of $10,863,022.00. The net result would be that, at best, the Bank's proof in the Part X administration should have been limited to $863,022. There would be nothing owing by the Bank to the Debtor. 29 On the material before me, it is apparent that the administration proceeded on the basis that the Bank was a creditor in the sum claimed, or at least in the sum asserted by the Debtor in the amended Statement of Claim. In the light of the Bank's present contention, it may be that, if there was in fact a claim for $10 million by the Debtor against the Bank, the administration has proceeded on a false premise. That question is not directly before me, and no submission has been made concerning the consequence, if any, which would flow from the Bank having been treated as a creditor without there being a set off as required by section 86. 30 However that may be, section 86 operates ipso iure. If there was a claim left extant, notwithstanding the abandonment of the proceedings which were current at the commencement of the Part X administration, the effect of section 86 was that it was set off against the Bank's debt. 31 It appears to me to follow that, if those contentions are accepted, at the time of service of the Bankruptcy Notice, the Debtor had no counter-claim, set-off or cross-demand arising out of the matters referred to in the proposed Amended Statement of Claim equal to or exceeding the amount of the sum payable under the costs order. The Bank accepts that, for the purposes of section 40(1)(g), the Debtor could not have set up any counter-claim, set-off or cross-demand in the action or proceeding in which that order was obtained. I express no view about that at this stage. 32 The object of set off in bankruptcy is to do substantial justice between the parties, where a debt is really due from the bankrupt to the debtor to his estate. It would be unjust if the trustee in bankruptcy could insist upon having 100 cents in the dollar upon the whole of the debt owed to the bankrupt but at the same time insist that the bankrupt's debtor must be satisfied with a dividend - Gye v McIntyre (1991) 171 CLR 609 at 618. 33 In the present case, the availability of a set off is to be determined on the hypothetical basis that a sequestration order was made against the Debtor on the date when the special resolution was passed. If that occurred, the right of action which the Debtor had against the Bank for damages for negligence or fraud would have vested in the Trustee. At the same time, the debt owing to the Bank would have become a debt provable in the administration by the Trustee. The question is whether, in those hypothetical circumstances, section 86 would have been applicable to allow or require a set off of the debt owing to the Bank against the debt owing by the Bank to the Trustee in bankruptcy in respect of fraud or negligence. 34 There will, for the purposes of section 86, be mutual dealings at the date of a sequestration order if there existed at that date "dealings" which involved the bankrupt and the other party and which were capable of giving rise to, and subsequently did give rise to, "mutual" claims between them in the sense in which the word "mutual" is used in section 86. The word, in the context of section 86, conveys the notion of reciprocity. Relevantly in the present case, the requirement of mutuality is that the credits, debts or claims arising from other dealings must be commensurable for the purposes of set off under the section. That means that they must ultimately sound in money. That requirement does not mean that they must be vested, liquidated or enforceable at the time of the special resolution accepting the composition. Provided they exist as contingent at that date and are of a kind which will ultimately mature into pecuniary demands susceptible of set off, the requirements of the section may be satisfied in relation to them - Gye v McIntyre at 623-4. 35 Whether or not there were an effective assignment to the Debtor of all causes of action relating to or in any way arising out of the dealings between the Debtor and the Bank in the period 1986 to 26 October 1992, I consider that the effect of section 86 was, in effect, to extinguish such claims. The claims, in so far as they are articulated in the proposed Amended Statement of Claim, are clearly capable of sounding in money and that is the way in which the Debtor puts the claims. 36 I consider that the dealings alleged in the proposed Amended Statement of Claim are dealings within section 86, such that the effect of them gives rise to the requirement for an account to be taken as at the date of the passing of the special resolution. Whether or not there were, in truth, claims in existence as at that date, the result is that only the balance of the account taken as between the Debtor and the Bank was payable to the Trustee. That is the extent of what could have been assigned by the Trustee to the Debtor. In other words, in so far as there was an assignment of the Trustee's rights in, title to, and causes of action relating to, the dealings between the Debtor and the Bank, that was limited to the balance, if any, after setting off the Bank's claim. In fact, the balance was nil because the Debtor's claim, at its highest, is less than the amount owing to the Bank as asserted by the Debtor himself. 37 Accordingly, I am not satisfied, on the basis of the grounds advanced by the Debtor when the matter first came before me, that the Debtor had or has a counter-claim, set-off or cross-demand equal to or exceeding the amount of the order for costs which was the subject of the Bankruptcy Notice. 38 As I have indicated earlier in the day, when the matter was first before me there were concerns on the part of counsel for the Debtor as to the adequacy of the evidence relating to the claim made in Supreme Court proceedings, 21004/95. The matter was adjourned to today to enable further evidence to be filed by the Debtor. A further affidavit was filed which, for the reasons I delivered earlier in the day, I admitted over the opposition of senior counsel for the Bank. By that affidavit, the Debtor seeks to set up a further claim which will be unaffected by the operation of section 86 of the Act. The claim may generally be summarised as follows: · As at the date of the deed of assignment, the Debtor was the owner of various items of plant and equipment. The precise description of the plant and equipment is not without doubt. The Debtor asserts that the equipment is as follows: (a) circular stall complex; (b) 12 standard stalls; (c) one stallion stall; (d) one stable complex comprising 26 boxes and accessories; (e) four grain silos; (f) one shed; (g) one mobile start race gate. Apart from a mere uncorroborated assertion as to ownership, there is some material before me comprising copies of income tax returns of the Debtor for the years ended 30 June 1986 and 30 June 1988. Depreciation schedules describe the following items: four silos, at original cost of $7,052; stables and yards complex at an original cost of $309,116; mobile starting barrier at an original cost of $1,000. · On 1 October 1992, the Trustee entered into an instrument of assignment with John Bertram Foyster and Mark Foyster ("the Foyster Brothers"). By that instrument, in consideration of the sum of $26,000 paid by the Foyster Brothers to the Trustee, the Trustee assigned and transferred to the Foyster Brothers all of the right, title and interest, if any, (as to which the Trustee made no representation) of the Debtor in and to the property described as follows: "Demountable stables, the subject of valuation report of Lawson's, dated 21 August 1992, annexed. One or more silos standing on concrete slab, One or more portable starting stalls mounted on rubber wheels, 40 x 25"[sic] steel and iron mobile storage shed." · On 20 June 1994, a deed was entered into between the Foyster Brothers and the Debtor. By that deed, the Foyster Brothers assigned to the Debtor all of their right, title and interest in the items referred to in the second schedule, which were identical to the description of property referred to in the assignment of 1 October 1992 ("the Claimed Property"). · On 22 October 1994, the Bank, acting as mortgagee in possession, sold certain land owned by the Company. Later in 1994, the Bank, also acting as mortgagee in possession, sold a further parcel of land owned by the Company. The Debtor contends that, in connection with those sales, the Bank sold part of the Claimed Property, and that by doing so, the Bank committed the tort of conversion, thereby rendering itself liable to the Debtor for damages. The Debtor claims that he has a counter-claim, set-off or cross-demand by reason of that conversion and that the amount exceeds the amount claimed in the Bankruptcy Notice. 39 There are a number of difficulties with that claim. The first is a difficulty in tracing specific property, said to be owned by the Debtor, as being property which was the subject of any sale by the Bank. It is common ground that the Bank, in connection with the sale of part of the land, sold a horse stable complex comprising "22 stable porta stall and five paddock porta stalls, [and] 15m x 22m steel framed shed with roller door". There is no evidence before me of any sale by the Bank of any other property which falls within the description of the Claimed Property. Assuming that the property sold by the Bank in 1994 was, in fact, property owned by the Debtor by reason of the two assignments to which I have referred, a real question arises as to the value, if any, that that property had and which might give rise to a claim for damages in favour of the Debtor. 40 The assignment by the Trustee to the Foyster Brothers is expressed to be in consideration of $26,000. There is nothing to suggest that the assignment was otherwise than at arms length. Accordingly, that would ordinarily be good evidence of the value of property that was the subject of the assignment. 41 So long as the property was installed on, and capable of being used in connection with the land, it would have a value to the owner of the land. The valuation report attached to the assignment of October 1992 contains, inter alia, the following: "We are of the opinion that this 'Port-A-Stall' complex, erected 'in situ' has a Going Concern Value in the vicinity of $46,500. ………. We are further of the opinion that this Port-A-Stall complex, dismantled and flat-packed, has an Auction Realisable Value in the vicinity of $11,700. […] The Auction Realisable Value quoted is entirely dependent upon the manner in which the complex is dismantled and marked…." The estimate given of the cost involved in selling the dismantled stables was in the vicinity of $17,000. The report went on to say: "[W]e could not envisage that the gross price realised by the sale at Auction of these stables in a dismantled, flat-packed condition, would exceed the costs involved in that sale. The preceding figures indicate that the sale of these stables by this method is economically unviable and we would suggest other methods of disposal be persued [sic]." 42 There is also evidence before me of a schedule prepared by Hymans, auctioneers and valuers. The document was produced by the Bank in answer to a notice to produce. Its date is not clear and its purpose is also not clear. However, it does bear on the question of loss and says, inter alia, as follows: "Our instructions in this matter were to attend the Country Comfort Inn at Mudgee and carry out an inventory and appraisal of agricultural and other equipment as detailed on the list supplied to us from your office. ……….. Our research into the stable complex has located the original supplier of the stable who advises us as follows: ………… (c) The complex was originally installed in February of 1981; (d) Given the way in which these buildings are supplied with concrete included any potential owner of the stable would in fact be the owner of the concrete slab that the stable rests upon; (e) The shed is fixed to the concrete slab by way of welded joints to steel base plates set into the concrete; (f) Should the shed need to be dismantled and removed from the site the supplier estimates the costs [to be $24,000]. (g) During our inspection is [sic] was noticed that a stable complex of 22 stables and a roll pen was dismantled on the site and we are advised that this has been sold for $8,000. We believe that a similar comparison can be drawn for the erected stable complex even though the dismantled complex was circular in shape." 43 The valuation of the stable complex which appeared in the schedule was $25,000 as a going concern or a range of $8000 to $15,000 at auction. Assuming that that document is approximately contemporaneous with the date of the sale and assuming the property included in the sale by the Bank was owned by the Debtor, it appears that that property had virtually no value except to the owner of the land. There can be no doubt that the owner of the land had an interest and that the value to that owner would be equal to the replacement value. 44 However, so far as a third party who may be entitled to the property sold is concerned, on the assumption that it was not a fixture, the value is virtually nil. On the material before me, therefore, I am not satisfied, even if the property included in the sale did belong to the Debtor, that any claim against the Bank would have any value at all. Accordingly, I am not satisfied, for the purposes of section 40(1)(g) that there is any counter-claim, cross-claim or set-off by reason of any conversion of an amount exceeding the amount claimed in the Bankruptcy Notice. 45 The Bank also relies on two other matters. The first was that, on the basis of the material which I have briefly summarised above, there was no interest vested in the Debtor because the stables and shed were fixtures. The manner of affixing of the stables and the shed suggests that they were affixed with the intention of remaining in position permanently or indefinitely. They were certainly not standing on the land by means only of their own weight, but were bolted to a concrete slab. While the observations made by a valuer as to ownership would not be binding, there is some substance in the observation in the extract set out above. There must be a very strong argument that the stables and sheds, bolted as they were, were fixtures so as to become part of the land, notwithstanding that at some stage their construction might have been at the cost or behest of someone other than the owner of the land - see Australian Provincial Assurance Company Limited v Coroneo [1938] 38 SR(NSW) 700 at 712. There is no evidence that the Bank sold any of the other Claimed Property, such as the mobile starting barrier or silos. 46 Finally, the Bank says that, even if there were a claim for conversion in excess of the amount of the Bankruptcy Notice, I would not be satisfied that the test to which I have referred above itself has been satisfied. That is to say, the claim maintained at this stage could not be said to be one maintained in good faith. 47 I have referred briefly to proceedings 21219/96 in the Supreme Court, which have been dismissed. In the statement of claim filed in those proceedings, an allegation was made that, during 1994, the Bank and the receiver of the Company sold freehold property and other assets of the Company by public auction, including certain plant and equipment that the Debtor claims title to and which was then situated on the freehold property. There was a claim in those proceedings for damages against the Bank for conversion of assets. The claims are not particularised in the statement of claim and it is defective for that reason if nothing else. 48 However, it is clear enough that the claim is the one which has now been formulated. Notwithstanding the dismissal of those proceedings, albeit summarily, there has been no attempt made by the Debtor to revive the conversion claim. In particular, it was not revived at any stage in the proceedings before Hidden J. It was not mentioned as a ground for setting aside the Bankruptcy Notice prior to the filing of the further affidavit late last week, pursuant to the directions which I gave earlier in the week. Accordingly, I would not be satisfied that the Debtor makes the claim for conversion in good faith in the circumstances suggested by the High Court in Ebert v Union Trustee Company of Australia Ltd. 49 It follows, from the conclusions which I have indicated above, that I am not satisfied at all that the Debtor has a counter-claim, set-off or cross -demand equal to or exceeding the amount of the sum payable under the final order made by the Supreme Court. Accordingly, in my view, the present application before me should be dismissed with costs. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 27 July 1999 Counsel for the Applicant: M.B. Evans Solicitor for the Applicant: G H Healey & Co - Newtown Counsel for the Respondent: A.W. Street SC; J.E. Stuckey-Clarke Solicitor for the Respondent: Blake Dawson Waldron Date of Hearing: 20 July 1999; 27 July 1999 Date of Judgment: 27 July 1999