FEDERAL COURT OF AUSTRALIA Baker v Perpetual Trustee Company Limited [2012] FCA 553 Citation: Baker v Perpetual Trustee Company Limited [2012] FCA 553 Appeal from: Perpetual Trustee Company Limited v Baker [2011] FMCA 263 Parties: GARY BAKER v PERPETUAL TRUSTEE COMPANY LIMITED ACN 000 001 007 File number: NSD 592 of 2011 Judge: KATZMANN J Date of judgment: 30 May 2012 Catchwords: BANKRUPTCY – appeal from sequestration order – "other sufficient cause" to dismiss creditor's petition – Bankruptcy Act 1966 (Cth), s 52(2)(b) – cross-claim against petitioning creditor – whether solvency relevant – whether debtor's cross-claim against petitioning creditor in the same right – whether federal magistrate erred in failing to dismiss or adjourn creditor's petition because of debtor's cross-claim – whether federal magistrate erred in finding that the value of the cross-claim fell significantly short of the judgment debt giving rise to the bankruptcy notice – whether denial of procedural fairness in proceeding below Legislation: Bankruptcy Act 1966 (Cth) s 52 Trade Practices Act 1974 (Cth) s 52, 84(2) Cases cited: Branir Pty Ltd v Owston Nominees (No. 2) Pty Ltd (2001) 117 FCR 424 Cain v Whyte (1933) 48 CLR 639 Commonwealth Bank of Australia v Paola (2005) 3 ABC(NS) 703; [2005] FCA 855 House v The King (1936) 55 CLR 499 Ling v Commonwealth (1996) 68 FCR 180 Ling v Enrobrook Pty Ltd (1997) 74 FCR 19 Lisciandro v Official Trustee in Bankruptcy (1995) ATPR ¶41-436 Marks v GIO Australia Holdings Limited (1987) 196 CLR 494 Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 Oshlack v Richmond River Council (1998) 193 CLR 72 Perpetual Trustee Co Ltd v Triprush Pty Ltd [2010] NSWSC 861 Probiotec Ltd v University of Melbourne (2008) 166 FCR 30 Re Minister for Immigration and Multicultural Affairs; Ex parte "A" (2001) 185 ALR 489 Rotstein v Slaveski (2010) 8 ABC(NS) 200; [2010] FCA 493 SBBS v Minister for Immigration and Multicultural Affairs (2002) 194 ALR 749 Stead v State Government Insurance Commission (1986) 161 CLR 141 Stec v Orfanos [1999] FCA 457 Totev v Sfar (2006) 230 ALR 236 Water Board v Moustakas (1988) 180 CLR 491 Date of hearing: 12 & 13 April 2012 Date of last submissions: 27 April 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 98 Counsel for the Appellant: Mr M Darke Counsel for the Respondent: Mr V Bedrossian Solicitor for the Respondent: Norton Rose Australia IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 592 of 2011 ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA BETWEEN: GARY BAKER Appellant AND: PERPETUAL TRUSTEE COMPANY LIMITED ACN 000 001 007 Respondent JUDGE: KATZMANN J DATE OF ORDER: 30 MAY 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The notice of contention be dismissed. 3. The appellant pay the respondent's costs of the appeal (excluding the costs of the notice of contention). 4. Leave be granted to the appellant, if eligible, to make an application for costs of the notice of contention within seven days. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 592 of 2011 ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA BETWEEN: GARY BAKER Appellant AND: PERPETUAL TRUSTEE COMPANY LIMITED ACN 000 001 007 Respondent JUDGE: KATZMANN J DATE: 30 MAY 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The appellant, Gary Baker, was a property developer at the high end of the property market. For that purpose through a number of companies he entered into various mortgages secured over the properties for which he personally provided guarantees. On 15 April 2011, on the petition of one of the mortgagees, Perpetual Trustee Company Limited ("Perpetual"), a federal magistrate made a sequestration order against his estate and ordered him to pay Perpetual's costs. On 6 May 2011 Mr Baker appealed from those orders. The appeal was originally listed for hearing in November 2011 but the hearing was delayed at Mr Baker's request to enable him to obtain legal representation. 2 Mr Baker opposed the creditor's petition and sought to have it dismissed on the ground that he had two outstanding claims (in the nature of cross-claims) for damages against Perpetual. Alternatively, he asked that the petition be adjourned to give him an opportunity to litigate those claims. 3 The federal magistrate found that the claims were not sufficient to warrant dismissing or adjourning the petition and was not satisfied that Mr Baker would be solvent even if the claims succeeded. 4 The appeal raises four broad issues: 1. Whether one of the claims Mr Baker made against Perpetual was sufficient to warrant dismissal or adjournment of the petition; 2. Whether, where a debtor does not claim to be able to pay his or her debts, in considering whether a sequestration order should not be made "for other sufficient cause", solvency is a relevant consideration; 3. Whether, if solvency were relevant, the primary judge was wrong to find that Mr Baker would not be solvent if his claims succeeded; 4. Whether Mr Baker was denied procedural fairness in connection with the question of his solvency. 5 An additional issue is raised by a notice of contention. Perpetual contends that the federal magistrate's decision should be upheld because the claim Mr Baker was relying on to avoid the sequestration order was a claim made against Perpetual in a different capacity from that in which Perpetual brought the petition. Background 6 The creditor's petition (dated 10 November 2010) was founded on Mr Baker's failure to comply with a bankruptcy notice requiring him to pay a debt of $788,351.37 owing to Perpetual as a result of a judgment entered in the NSW Supreme Court on 5 August 2010. In that proceeding Perpetual claimed damages against two companies associated with Mr Baker, one of whom was Triprush Pty Ltd, and Mr Baker himself, after the companies had defaulted under loan agreements secured by a guarantee Mr Baker had provided ("the Triprush proceeding"). Perpetual obtained summary judgment: Perpetual Trustee Co Ltd v Triprush Pty Ltd [2010] NSWSC 861. 7 Section 52 of the Bankruptcy Act 1966 (Cth) ("the Act") relevantly provides: 52 Proceedings and order on creditor's petition (1) At the hearing of a creditor's petition, the Court shall require proof of: (a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient); (b) service of the petition; and (c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing; and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor. … (2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor: (a) that he or she is able to pay his or her debts; or (b) that for other sufficient cause a sequestration order ought not to be made; it may dismiss the petition. … 8 Mr Baker contended that "for other sufficient cause" the order should not have been made. Alternatively, he argued, the proceeding should be adjourned. 9 In the Federal Magistrates Court Mr Baker filed a notice stating two grounds of opposition to the petition. The notice was supported by an affidavit sworn on 18 February 2011 ("the February 2011 affidavit"). 10 The first ground of opposition recited that Mr Baker had a cross-claim against Perpetual by reason of its conduct in exercising its powers of sale as a mortgagee in possession over an apartment in Notts Avenue, Bondi Beach, after one of Mr Baker's companies (Montpensier Pty Ltd) defaulted under the loan, a loan that Mr Baker had guaranteed. Mr Baker contended that in selling the apartment for (allegedly) substantially less than it was worth, Perpetual was in breach of its duties as mortgagee and should pay him damages. 11 In oral submissions before the federal magistrate, Mr Baker (through his then counsel) submitted that any surplus of funds on a proper sale of the Notts Avenue property would have been required to be paid against the Triprush judgment debt. Perpetual then sought and was granted leave to file further affidavit evidence. The evidence related to: The loan by Perpetual ("as custodian for" a particular Mirvac Debt Pool) to Montpensier secured by the Notts Avenue property; A loan by Challenger Managed Investments Ltd ("Challenger") to Montpensier secured by a different Notts Avenue property; A loan by Challenger to another of Mr Baker's companies, Garbake Pty Ltd ("Garbake") secured by a property at 3/15 Benelong Crescent, Bellevue Hill; The shortfalls after sale of the second Notts Avenue and Benelong Crescent properties; The circumstances of, and the then current position concerning, Mr Baker's indebtedness in relation to the loans taken out over the properties which Mr Baker guaranteed; The amount owing by Mr Baker under the guarantee in relation to the loan from Perpetual to Montpensier. 12 The second ground of opposition was that Mr Baker had another cross-claim against Perpetual arising from misleading conduct by Challenger, from whom Mr Baker said he was claiming damages of $1.25 million plus interest and costs. He said that at that time he was only seeking damages from Challenger and a third party but that he intended to amend the cross-claim to add Perpetual on the ground that Challenger was at all times acting as its agent. It is this second cross-claim that lies at the heart of the appeal. 13 This second cross-claim related to the Benelong Crescent property. The property was jointly owned by Mr Baker and Garbake as tenants-in-common, subject to a mortgage to Perpetual "as custodian" for Challenger, who lent the money to Garbake as part of a refinance in December 2007. Mr Baker (together with another of his companies, Mine & Quarry Pty Ltd) was the guarantor of this loan to Garbake, too. Garbake defaulted on the loan and in 2009 Perpetual and Challenger sued Garbake, Mr Baker and Mine & Quarry Pty Ltd in the NSW Supreme Court for possession of the property, claiming judgment in the sum of $3,984,035.43 ("the Garbake proceeding"). Relying on a valuation of $5.595 million dated 18 December 2007, which Challenger sent to him, Mr Baker contended that Perpetual, through Challenger, had made misrepresentations about the value of the property, which induced him to reject an offer made in early 2008 to purchase the property for $4.25 million. Mr Baker alleged that these representations caused him to suffer a substantial loss as in December 2010 the property was sold by public auction for just over $3 million. He claimed damages for $1.25 million, representing the difference between the two sums (although in evidence he reduced the claim substantially). The decision of the federal magistrate 14 The federal magistrate held that the grounds of opposition, either alone or in combination, did not warrant either the dismissal or adjournment of the petition. In doing so her Honour noted (at [105] of her reasons) what she said was a general principle that, having regard to the policy objectives of the Act, an applicant seeking an adjournment should put the Court in possession of all possible information relating to his or her financial position. (This observation gives rise to the first ground of appeal. Mr Baker claims that the federal magistrate erred in finding that Mr Baker was required "as a matter of law" to present that information.) The relevant policy objectives (I infer from her Honour's reference to Rotstein v Slaveski (2010) 8 ABC(NS) 200; [2010] FCA 493 at [17]) were the public interest in stopping individuals who are unable to meet their debts from continued insolvent trading and assisting creditors who are unable to recover debts owed to them. 15 In [106] of her reasons the federal magistrate said that, in considering whether there was "other sufficient cause" to dismiss the petition under s 52(2)(b) of the Act, the absence of evidence of Mr Baker's overall financial position was relevant because, if he would be insolvent even if he succeeded in his proposed cross-claim, the cross-claim may not constitute a sufficient cause to dismiss the petition. In this regard she cited Commonwealth Bank of Australia v Paola (2005) 3 ABC(NS) 703; [2005] FCA 855 at [25]–[26] and [28] per Hill J and, more generally, Totev v Sfar (2006) 230 ALR 236 ("Totev") at [44]. Her Honour then said that Mr Baker had chosen not to put such evidence before the Court but that there was evidence of various loans to companies associated with Mr Baker, which he had guaranteed. She then proceeded (at [107]) to refer to evidence of liabilities under those loans. She also referred to a large contingent liability. She noted that Mr Baker called no evidence in reply. Then (at [110]) her Honour concluded that Mr Baker had "significant actual or contingent liabilities, arising from a number of loan arrangements for which he has acted as guarantor … in circumstances where he had not purported to depose any evidence as to his current financial circumstances and has not deposed that he was solvent". She said this was relevant "as part of all the circumstances" in determining whether there was "other sufficient cause" not to make a sequestration order within s 52(2)(b) of the Act. The finding (at [110]) (and the observation that followed it) gives rise to the sixth to ninth grounds of appeal. 16 Her Honour then remarked (at [111]) that it is well established that the mere existence of an arguable claim does not, of itself, constitute "other sufficient cause". She said the Court must assess the prospects of success on the material it. On the material before her, she held (at [126]) that Mr Baker had not established he had a real claim against Perpetual that was likely to succeed in an amount likely to equal or exceed the creditor's claim so as to constitute "other sufficient cause" within s 52(2)(b) to warrant dismissal of the petition. 17 I shall pass over the findings in relation to the first ground of opposition (relating to the cross-claim in the Montpensier proceedings relating to the Notts Avenue property) as they are irrelevant to the appeal. 18 In relation to the second ground of opposition concerning the cross-claim in the Garbake proceeding her Honour's findings were sparse. She did not expressly find that the claim was not a real one or that it was not likely to succeed. She focussed only on the amount. Her reasons are contained within one paragraph of the judgment. It is convenient to reproduce it in full. At [125] her Honour said: Mr Baker's calculations of the maximum amount of any claim in respect to the Benelong Crescent property is on the basis that at or about the time of the offer of $4.25 million the indebtedness under the Garbake loan facility was about $3.7 million. For present purposes the applicant did not take issue with these figures and agreed that the maximum amount Mr Baker himself (as distinct from Garbake) could obtain from a cross-claim on the basis asserted in ground two in the notice of opposition would be in the vicinity of $200,000 to $300,000 plus interest. Of itself, this amount is significantly short of the judgment debt already in place against Mr Baker as a result of the Triprush proceedings. 19 Her Honour also said (at [127]) that, on the evidence, she was not satisfied that it would be appropriate to quantify the amount likely to be recovered and order Mr Baker to pay the difference between the judgment debt and the amount he claimed he was likely to receive if he succeeded. She reiterated that even if the amount of the claim asserted by Mr Baker were accepted, it would fall significantly short of the Triprush judgment debt. 20 As I will shortly explain, Mr Darke, who appeared for Mr Baker on the appeal but not in the Court below, submitted, in effect, that the "agreement" to which her Honour referred in [125] of her reasons (see [18] above) should not have been made as when the claim was correctly assessed it exceeded the amount of the Triprush judgment debt. That argument underlies grounds 4 and 5 of the amended notice of appeal. 21 Her Honour had earlier observed (at [122]) that another "possible obstacle" to the success of the Garbake cross-claim was that Perpetual did not act in the same capacity in the Triprush proceeding and in the Garbake proceeding. She noted Perpetual's argument that for this reason the claim should be treated as a claim against a third party but "given the factual difficulties facing the asserted cross-claim" she did not consider that it was necessary to deal with the argument. This is the subject of the notice of contention. 22 Her Honour refused to adjourn the proceeding because she saw no utility in doing so. She took into account what she said was the absence of evidence to establish that the cross-claims had sufficient prospects of success or would generate the money required to be paid towards the Triprush judgment debt; the lack of evidence to explain why the claims had not yet been brought in the Supreme Court proceedings; the uncertainty surrounding the timing of the determination of any such cross-claims; and the absence of any evidence of solvency. 23 Her Honour then went on to hold that she was satisfied of the matters required by s 52(1) of the Act and to note that there was no evidence to suggest, nor was it contended, that Mr Baker was able to pay his debts in the sense required by s 52(2)(a) of the Act, before making the sequestration order against Mr Baker's estate. The issues on the appeal 24 The appeal is in the nature of a rehearing, although error must still be shown: Branir Pty Ltd v Owston Nominees (No. 2) Pty Ltd (2001) 117 FCR 424 at [25]. Mr Baker accepts that the federal magistrate's decision whether to dismiss or adjourn the creditor's petition was discretionary and therefore to succeed he must show error of the kind referred to in House v The King (1936) 55 CLR 499 at 504–5. In other words, he must show that the federal magistrate acted upon a wrong principle, was influenced by irrelevant considerations, mistook the facts, failed to take into account "some material consideration" or that the decision was unreasonable or plainly unjust, so that the Court may infer that in some way there has been a failure properly to exercise the discretion. 25 Mr Baker submitted that: (a) his solvency was an irrelevant consideration; (b) in the alternative, the federal magistrate gave the question of his solvency too much weight, made wrong findings of fact, and denied him procedural fairness; (c) the federal magistrate acted on a wrong principle in that she failed to apply (or correctly apply) the principle that a sequestration order should only be made on the basis of a debt that is not counterbalanced by a claim the debtor has against the petitioning creditor; (d) the primary judge erred in her valuation of the Benelong Crescent claim and erred in failing to find that it was a real claim of sufficient integrity to warrant Mr Baker being given a chance to litigate it. Was solvency irrelevant? 26 The first question, then, is whether solvency was irrelevant. 27 This issue is raised by the first three grounds of appeal where Mr Baker alleges three errors on the part of the federal magistrate: (a) Error in finding that Mr Baker was required as a matter of law to put the Court in possession of all possible information as to his financial position; (b) Error in treating as a consideration relevant to the making of the sequestration order whether Mr Baker would be solvent if he succeeded on the claims against Perpetual set out in his notice of opposition; and (c) Error in failing to apply (or properly applying) the principle that such an order should only be made on the basis of an indebtedness which is not counterbalanced by a claim by the debtor against the petitioning creditor. 28 To understand the way in which Mr Baker puts his case it is necessary to refer to the authorities on which he relies. 29 Mr Baker relies on the principles set out in the judgment of Gibbs J (in the Federal Court of Bankruptcy) in Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 ("Re Schmidt"), which related to claims against a petitioning creditor relied upon to defeat a creditor's petition. As in this case, the petition was founded on a judgment debt. Mr Schmidt was the guarantor of covenants and obligations under an equitable mortgage over certain motor vehicles given to Anglewood by Excelsior Pty Ltd, a company which owned the vehicles and of which Mr Schmidt was a director. Excelsior defaulted under the mortgage and Anglewood called on the guarantee. After the bankruptcy hearing started but before it concluded, Mr Schmidt began an action in the NSW Supreme Court for unliquidated damages and loss of profits against Anglewood based on its conduct after the judgment was given which he said would extinguish or reduce the amount of his original debt or at least justify dismissal of the petition. The alleged conduct involved taking and wrongly detaining a number of items which were seized at the same time Anglewood's agent seized, under the terms of the mortgage, the vehicles secured by it. Mr Schmidt also complained that the vehicles had been sold at a gross undervalue. His Honour was not satisfied that they were, and found that Anglewood had to account to Mr Schmidt for the fair value of the other goods that were not its to seize but that the fair value was no more than $450, far less than the amount of the judgment debt. His Honour also said he was not satisfied that Mr Schmidt had lost any profits as alleged. But he declined to make a sequestration order and dismissed the petition on the basis that Mr Schmidt had shown "prima facie" that he had a claim against Anglewood arising out of the seizure of one of the items the value of which was greater than the debt on which the petition was founded. 30 In the course of his reasons his Honour said (at 116) that if the Court is satisfied that the debtor has a claim that is equal to or greater than the amount of the judgment debt a sequestration order should not be made. If, however, it appears that the debtor's claim is less than the amount of the judgment debt, then the proper course is to require the debtor to pay the difference between the amount of the judgment debt and the amount he will probably recover in the proceedings against the petitioning creditor. His Honour went on to observe that in many cases it would be more convenient, "assuming that the debtor showed that he had a real claim to litigate", to adjourn the proceedings to enable that litigation to proceed. In Re James; Ex parte Carter Holt Harvey Roofing (Australia) Pty Ltd (No 2) (1994) 51 FCR 14 ("Re James") at 22E (cited with apparent approval by Sundberg J in Ling v Commonwealth (1996) 68 FCR 180 at 195G) Olney J held that "a real claim" means a claim with "sufficient integrity to warrant the debtor being given an opportunity to have it litigated". Thus, Mr Baker argues that the creditor's petition should have been dismissed because he had shown there was sufficient validity in his claims to justify that course or, alternatively, adjourned to give him the opportunity to litigate the cross-claim because he had a real claim to litigate. 31 Perpetual does not quarrel with these principles. It argues, however, that they do not apply here because, although Mr Baker's cross-claims (actual and proposed) are made against Perpetual, they are made against Perpetual in different capacities. I shall come to this question later. 32 Gibbs J said nothing about solvency in Re Schmidt. But Mr Baker relies on some remarks of the Full Court in Ling v Enrobrook Pty Ltd (1997) 74 FCR 19 at 26C–D where the Court said that a sequestration order should only be made on the basis of an indebtedness which is not counterbalanced by a claim by the debtor against the petitioning creditor. For this reason, Mr Baker contends that solvency is irrelevant. Otherwise, he submits that a sequestration order could be made on the basis of a debtor's other debts, although the debtor had a likely successful claim that cancels out the debt the subject of the creditor's petition, effectively raising those other debts to the same status. 33 The argument must be rejected. 34 Mr Baker bore the onus of establishing that "for other sufficient cause" the sequestration order should not be made: Ling v Enrobrook at 24D. In Cain v Whyte (1933) 48 CLR 639 at 645–6, to which Allsop J referred in Totev, Henchman J of the Court of Bankruptcy (whose reasons were unanimously endorsed in the High Court at 648) said that it is for the debtor who wishes to avoid the sequestration order to persuade the Court that the public interest in dealing with the insolvent debtor and the rights of individual creditors are outweighed by other considerations. Cain v Whyte was concerned with s 56(3)(b) of the Bankruptcy Act 1924 (Cth), which differs in form, but not in substance, from s 52(2)(b) of the Act. In some, but not all circumstances, the fact that a debtor has pending before a Court a legitimate claim to funds sufficient to satisfy the petitioning creditor's debt will amount to such a cause: Ling v Enrobrook at 25A. If the claim is against the petitioning creditor, the Full Court said in Ling v Enrobrook that that will be a significant circumstance: Ibid. But it is not conclusive. 35 The Act confers a discretion on the Court which in its terms is unconfined. In these circumstances, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, unless the subject-matter, scope and purpose of the Act imposes an implied limitation on the factors the Court may legitimately consider: cf. Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39–40; Oshlack v Richmond River Council (1998) 193 CLR 72 at [22] per Gaudron and Gummow JJ; Probiotec Ltd v University of Melbourne (2008) 166 FCR 30 at [47] per Rares J. There is nothing, in my view, in the subject-matter, scope and purpose of the Act that imposes such a limitation. The commission of an act of bankruptcy has been described as tantamount to an admission of insolvency: M Murray and J Harris, Keay's Insolvency: Personal and Corporate Law and Practice (7th edition, Lawbook Co., 2011) at [1.80]. Upon proof of the matters set out in s 52(1) of the Act, a sequestration order will normally be made: Totev at [37] per Allsop J. 36 It seems to me, therefore, that proof of the matters set out in s 52(1) gives rise to an inference of insolvency. A debtor may persuade the Court that, contrary to that inference, he or she is able to pay his or her debts and s 52(2)(a) provides that in such a case the Court may dismiss the petition. It does not, however, follow that if a debtor does not rely on para (a), the debtor's capacity to pay his or her debts is irrelevant. If that were the case, the Court would not be able to take into account in the debtor's favour evidence to show that the debtor had no other debts than the debt the subject of the petition. 37 Secondly, there is direct authority to the contrary, which I am bound to follow unless I am persuaded it is clearly wrong. In Totev the debtor opposed a creditor's petition based on a judgment debt (amongst other reasons) on the ground that he had numerous proceedings in other courts in which he claimed more money than the judgment debt. He relied in particular on a claim that he had brought in the NSW District Court. Allsop J emphasised that it was for the debtor to show that there was "other sufficient cause" and said (at [40]) that a claim sounding in money by the debtor "may" amount to such a cause. Importantly, however, at [44] his Honour said: [i]t goes without saying that solvency is a relevant consideration. 38 I am not persuaded that his Honour was wrong. To the contrary, I respectfully agree with him. 39 Thirdly, Mr Baker's submissions take the Full Court's remarks in Ling v Enrobrook out of context. The point the Court was making in that case was that different principles apply to cases in which the other cause the debtor says is sufficient to persuade the Court to dismiss the petition is a claim against a third party. After referring to Re Schmidt, Re James and Ling v Commonwealth the Full Court said at 26C: The above authorities do not, in our view, support the appellant's contention that the courts recognise a public interest in allowing a debtor to prosecute litigation commenced by the debtor. The public interest recognised by such authorities is … that a sequestration order ought only to be made on the basis of an indebtedness which is not counterbalanced by a claim by the debtor against the petitioning creditor. Such authorities provide no comfort to a debtor who asserts a claim, not against his or her creditor, but against a third party. 40 On a fair reading of the reasons in Ling v Enrobrook the Court was not saying that it is irrelevant whether the debtor was insolvent or in the foreseeable future is unlikely to become solvent. The paragraph that follows makes this clear. There the Court said: The authorities also show that satisfaction that the debtor is well advanced with litigation likely to result in the debtor being in a position to pay his or her debts may well provide a basis for a finding that there is a "sufficient cause" for a sequestration order not to be made … But the authorities do not suggest that it is in the public interest to allow insolvent debtors to prosecute litigation generally. They only recognise that it is not in the public interest for a debtor to be forced into bankruptcy by reason of a state of insolvency likely to be of only short duration. 41 That disposes of the second and third grounds of appeal. 42 The first ground of appeal is based on a misreading of the federal magistrate's reasons. It is common ground that there is no legal requirement that a debtor put before the Court all possible information concerning his financial position. But her Honour did not say there was. On a fair reading of her reasons she was merely indicating that a debtor seeking an indulgence (here an adjournment), or seeking to persuade the Court that the usual consequences of proof of a creditor's petition should not follow, ought to be forthcoming about his financial position. As Perpetual submitted, that is a matter of common sense. In Re James Olney J considered there was no reason to adjourn a petition where the debtors could not show that they were able to pay their debts on the successful conclusion of the other proceedings said to provide sufficient cause to dismiss the petition. If solvency is relevant, did the federal magistrate err in deciding Mr Baker was insolvent ? 43 Mr Baker argues that the federal magistrate made errors of fact relating to the assessment of his solvency. These are raised as grounds 6, 7 and 8 of the appeal. These grounds are intimately connected with the ninth ground of appeal which alleges a denial of procedural fairness. 44 In ground 6 Mr Baker pleads that her Honour erred in finding he had the liabilities identified at [107]–[108] of her reasons. Ground 7 contends that her Honour erred in failing to have regard to relevant considerations, namely the grounds on which Mr Baker disputed the liabilities identified at [107]–[108] of the reasons. Ground 8 alleges that her Honour erred in finding that Mr Baker would not be solvent if he succeeded on the claims against Perpetual identified in the notice of opposition. 45 It is convenient to deal first with ground 7 and then grounds 6 and 8. 46 In [107] her Honour noted that Mr Baker did not seek to bring himself within the terms of s 52(2)(a) of the Act and went on to refer to a number of loans he guaranteed. She said there were "significant outstanding liabilities" in addition to the judgment debt that gave rise to the bankruptcy notice (and, ultimately, the petition). She noted that there was evidence that Mr Baker had liabilities as guarantor of three other loans. They were the loan from Perpetual to Montpensier in relation to the Notts Avenue property, the loan from Challenger to Montpensier in relation to another apartment in Notts Avenue and the loan from Perpetual secured by the Benelong Crescent property. The sum total of the stated liabilities under these three loans as at 1 March 2011 (around the time of the hearing before the federal magistrate) was in excess of $8.6 million. 47 Perpetual conceded that her Honour was in error in finding that Mr Baker had the liabilities referred to in [107] on the basis that that evidence was received only for a limited purpose. 48 At [109] her Honour also took into account Mr Baker's failure to respond to this evidence. Yet, although the opportunity was afforded to him to do so, it is common ground, as the transcript of the hearing below demonstrates, that he only did so on the assurance given by Perpetual's counsel, Mr Bedrossian, that Perpetual was only relying on the evidence for the limited purpose and would not rely on it to prove insolvency. I will return to this matter when dealing with ground 9 (the denial of procedural fairness claim). For the moment it is sufficient to reproduce an extract from the transcript of the first day's hearing before the federal magistrate, where Mr Neggo, who then appeared for Mr Baker, said: If the evidence was ultimately to be used only for that purpose, then it may well be that no evidence in reply is required at all but if it is to be used for another purpose which is to say look at these other creditors of Mr Baker, then in fairness he, I anticipate, would want to call on evidence of the kind Mr Bedrossian mentioned. He might want to say, well such and such a creditor, I don't actually owe him this money or this is disputed --- (Emphasis added.) 49 At this point Mr Bedrossian interrupted, saying: I don't rely on my affidavits for that purpose. 50 And her Honour said: No, I didn't understand the affidavits to be relied on for that purpose. 51 For whatever reason, her Honour seems to have forgotten this exchange. She relied upon the evidence for the precise purpose that they were not to be used. She should not have done so. But for this material there was no evidence that Mr Baker had "significant liabilities" in addition to the debt the subject of the petition. The finding to the contrary should not have been made. It was made in denial of procedural fairness. 52 In any case, the evidence also revealed that Mr Baker disputed that he had the liabilities under two of the loans. Her Honour did not advert to this evidence. It was obviously a relevant consideration. Perpetual did not contend otherwise. Furthermore, in the case of the third loan (from Challenger to Montpensier), no demand for payment had been made of Mr Baker, no proceedings had been brought against him under the guarantee and he was asked no questions about the loan in cross-examination. 53 It follows that grounds 6 and 7 must be upheld, at least in part. 54 The liability identified at [108] of the federal magistrate's reasons, however, falls into a different category. At [108] her Honour observed that in cross-examination Mr Baker acknowledged that he potentially owed Suncorp $1.9 million. Her Honour said that, although Mr Baker "seemed to suggest that he had reached an agreement in relation to that transaction", he did not offer any evidence as to the basis for, or prospects of, successfully settling or resisting such a claim. 55 In cross-examination it was put to Mr Baker that a demand had been made of him by or on behalf of Suncorp in respect of a loan he guaranteed. Mr Baker replied: "I don't think I've received any documentation from Suncorp I must say". Then the following exchange took place: Well, you are aware of Suncorp making a claim that you have guaranteed a loan, correct?---No, I'm not aware of that. If they – I have spoken to Suncorp and they're happy to settle with me. So – but they haven't – I don't believe that I have been served with any documents from Suncorp. … Potentially their claim against you is $1.9 million under guarantee? ---Potentially, but I don't believe that I've been served any documents in relation to a claim. But you agree that claim is potentially that amount?---Potentially it does exist. 56 This was the only evidence about an alleged debt owing to Suncorp. Mr Darke submitted that the statement at [108] was a wrong finding of fact but no finding of fact was made there. The finding is at [110]. It is a finding that Mr Baker had a contingent liability. That finding is obviously based on Mr Baker's admission that Suncorp potentially had a claim against him under a guarantee he gave. I cannot see the error. Although Mr Baker did say that Suncorp was happy to settle with him, he did not say, let alone prove, that he had any grounds for disputing the liability should Suncorp call on the guarantee. 57 Whether or not her Honour was entitled to rely on this evidence, however, she was not entitled to rely on the evidence to which she referred at [107] which informed her statement (at [110]) that there was evidence that Mr Baker had "significant actual or contingent liabilities arising from a number of loan arrangements for which he has acted as guarantor …". What weight she gave to any of it, it is impossible to say. But it is also impossible to avoid the conclusion that, in taking it that Mr Baker would not be solvent if he succeeded in his cross-claims, her Honour was influenced by the evidence she should not have considered. The alleged significant actual liabilities exceeded $8 million. Once they are ignored, all the evidence revealed was a contingent liability. Although the contingent liability was not insignificant, the contingency might never have been realised and Mr Baker's evidence, weak as it was, pointed in that direction. 58 That does not mean, however, that her Honour erred in finding that Mr Baker would not be solvent if he succeeded on the claims made in his notice of opposition. Mr Baker bore the onus of proof on this question. The admissible evidence did not show that he would not be solvent but, equally, I do not think that the evidence was sufficient to establish that he would be. Was there a denial of procedural fairness? 59 Ground 9 of the amended notice of appeal pleads that the federal magistrate denied Mr Baker procedural fairness by relying on Perpetual's further evidence to make findings as to Mr Baker's general indebtedness and solvency in circumstances whether Perpetual had said, and her Honour had acknowledged, that that evidence was not relied upon for that purpose. Mr Baker contends that he was denied an opportunity of calling evidence in reply. 60 There is no dispute that there was a denial of procedural fairness in this respect. The only dispute is as to its consequences. 61 Not every departure from the rules of natural justice will entitle the aggrieved party to a new trial and an appellate court will not order a new trial if it would inevitably result in the same order: Stead v State Government Insurance Commission (1986) 161 CLR 141 at 145. Mr Baker has not identified the evidence he would lead if given the chance. Cf. Re Minister for Immigration and Multicultural Affairs; Ex parte "A" (2001) 185 ALR 489 at [54] per Kirby J, applied by the Full Court in SBBS v Minister for Immigration and Multicultural Affairs (2002) 194 ALR 749 at [37]. Mr Darke conceded that if Perpetual was right about the value of the Garbake cross-claim, the appeal must fail, regardless of the merits of the other grounds. Was there error in the evaluation of the Benelong Crescent claim? 62 The Garbake cross-claim, it will be remembered, concerns the Benelong Crescent apartment. It is the subject of the fourth and fifth grounds of appeal. Mr Baker contends in ground 4 that the federal magistrate erred in failing to find that he was likely to recover damages (plus interest) equal to or greater than the judgment debt or at least to the tune of $400,000 to $450,000. In ground 5 he says (in the alternative) that her Honour erred in failing to find that the Benelong Crescent claim was a real claim of sufficient integrity to warrant him being given an opportunity to litigate it (and therefore that she should have adjourned the hearing of the petition). 63 The primary question for the federal magistrate's consideration was whether Mr Baker had before a court a legitimate claim to funds sufficient to satisfy the petitioning creditor's debt: Ling v Enrobrook at 25A. Her Honour answered that question, but in doing so did not make findings on the legitimacy of the claim, contenting herself with the conclusion that it could not equal or exceed the value of the judgment debt. She also expressed concerns about why the claim had not yet been brought and about when it would be determined. 64 Mr Darke submitted first, that the claim was a real claim which was likely to succeed because Mr Baker's evidence was unchallenged. 65 Secondly, Mr Darke submitted that the true value of the claim was $1.249 million of which Mr Baker was entitled to at least half, namely $624,500, together with interest. Applying interest to that sum at NSW Supreme Court rates from 2008 to the end of 2012 (by when, he contended, the claim should be determined) gives a total of around $900,000, which is significantly greater than the Triprush judgment debt. 66 I accept the submission that the claim was a real one which was likely to succeed. Perpetual raised no argument against the submission and the evidence supports it. 67 The evidence before her Honour was contained in an affidavit sworn by Mr Baker in the Garbake proceeding ("Garbake affidavit"), which was an exhibit to Mr Baker's February 2011 affidavit. The Garbake affidavit was sworn on 4 December 2009, more than four months before the cross-claim was filed. The following account is taken from that affidavit. Mr Baker was not cross-examined so as to suggest that anything in it was wrong. 68 Mr Baker said that he and Garbake purchased the Benelong Crescent property as tenants-in-common in equal shares. Mr Baker was Garbake's sole director and shareholder. They developed the property into three units and in March 2007 Mr Baker engaged a real estate agent to sell them. At that time the agents estimated that unit 1 would sell for $4.2 million, unit 2 for $4 million and unit 3 for $4.1 million. In April 2007 they sold unit 1 for $4.2 million, and in May 2007, they sold unit 2 for $4.75 million. Unit 3 remained unsold. 69 In late 2007 Mr Baker was considering refinancing a loan secured over unit 3. At the time the outstanding debt over the property was around $3.7 million. On 5 December 2007, Craig Hitchings of Challenger Commercial Lending Ltd offered a loan to Garbake from Challenger and Perpetual to be secured by unit 3. On 18 December 2007, Mr Hitchings sent Mr Baker a valuation prepared by LandMark White (NSW) Pty Ltd for Challenger and Perpetual and dated the same day. LandMark White valued the property at $5.595 million (excl GST). Later that day Mr Baker and Mr Hitchings had a telephone conversation. Mr Baker told Mr Hitchings that he was surprised at the valuation as it seemed high but Mr Hitchings endorsed the valuation, telling Mr Baker that "they" were happy with it, that the offered loan would be made on the basis of it and, in effect, that LandMark White had got it right. 70 Mr Baker said he was persuaded by the valuation, the fact that a large banking organisation like Challenger was prepared to accept it and endorse the valuer, and by what Mr Hitchings had said to him. On that basis Mr Baker said he believed unit 3 was worth about $5.5 million. Consequently, in early 2008 he rejected an offer to purchase it for $4.25 million. Had it not been for the valuation and Mr Hitchings's endorsement, Mr Baker said he would have accepted that offer; indeed, he would never have entered into that mortgage in the first place. Despite marketing the property continuously from early 2008, Mr Baker never received any interest in it at or around $5.5 million. On 11 December 2010 unit 3 was sold in a mortgagee sale for $3,001,000. 71 The cross-claim names both Challenger and Perpetual as two of three cross-defendants (the third is the valuer, LandMark White) and claims damages against all three of them. But the material facts necessary to support the relief sought against Perpetual are not pleaded. The cross-claim relevantly pleads that by Mr Hitchings's conduct, Challenger made a number of misrepresentations to Mr Baker, including that the market value of unit 3 was $5.595 million (when it was less than that), and that the LandMark White valuation was the product of due care and skill (when it was not). Amongst other things, the making of these misrepresentations is alleged to have constituted misleading and deceptive conduct by Challenger, contrary to s 52 of the Trade Practices Act 1974 (Cth) ("TPA"). Consistent with what he said in his affidavit, that conduct is said to have caused Mr Baker loss and damage, including by inducing him to reject the offer to purchase the Benelong Crescent property for $4.25 million. 72 The claim Mr Baker wanted to make against Perpetual and which is the subject of the second ground of opposition is based on the same facts. In his Garbake affidavit Mr Baker said that he intended to claim that in engaging in the misleading conduct Mr Hitchings was acting on behalf of both Challenger and Perpetual and that both companies are liable for his conduct. 73 As Mr Darke submitted, the only modification needed to convert the pleaded claim against Challenger into one against Perpetual, too, would be to allege that Mr Hitchings's conduct was engaged in on behalf of Perpetual within the terms of s 84(2) of the TPA. Section 84(2) provided: Any conduct engaged in on behalf of a body corporate: (a) by a director, employee or agent of the body corporate within the scope of the person's actual or apparent authority; or (b) by any other person at the direction or with the consent of agreement (whether express or implied) of a director, employee or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent; shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate. 74 For s 84(2) to apply there is no need to establish a formal relationship of principal and agent between Perpetual and Mr Hitchings or Challenger: see Lisciandro v Official Trustee in Bankruptcy (1995) ATPR ¶41-436 at 40,903–4. As Kiefel J said in that case, the sub-section was intended to extend the common law. Its purpose was to attribute to a company the conduct of others for which it may not ordinarily be responsible. It is possible, her Honour indicated, that the conduct of a person who is associated in business with a company but not authorised as its agent for the purpose in question could make the company liable. It is arguable, at least, that Mr Hitchings was such a person. Certainly, a properly formulated claim based on the evidence in Mr Baker's affidavit in the Garbake proceeding is clearly open. Perpetual did not contend otherwise. In his February 2011 affidavit Mr Baker said that Mr Hitchings told him in response to a direct question as to the source of the money for the loan, "We do the deal, the money comes from Perpetual, we represent Perpetual". He was not cross-examined on this evidence. 75 I now turn to consider the controversial question – the value of the claim. 76 Mr Baker's case on appeal is based on his unchallenged evidence that, but for the misleading conduct, unit 3 would have been sold for $4.25 million, and the evidence Perpetual led that it was sold for only $3.001 million (the difference between those two figures is the $1.249 million mentioned above). This was the way the case was put in the notice of opposition. 77 These grounds of appeal proceed on the basis that in the Court below Mr Baker made a concession he ought not to have made, one that was in fact incorrect. 78 In his February 2011 affidavit Mr Baker said (at [48]): If I am successful in the Cross claim I claim between $400,000.00 and $600,000.00 plus interest from around February 2008 to the present plus costs. 79 The claim, as Mr Baker formulated it in his affidavit, took into account the outstanding debt on the property. This was the way the case was put below, save that Mr Neggo accepted that, because of Garbake's interest Mr Baker was only entitled to a half share, reducing the value of the cross-claim to $200,000 to $300,000. On appeal, however, Mr Baker's case is that he was mistaken in what he said in his affidavit and that he should recover considerably more than this if he succeeds on the cross-claim. Perpetual did not contend that Mr Baker should not be able to put this argument having regard to the evidence in his affidavit. There was no suggestion that the argument could possibly have been met by calling evidence below: Water Board v Moustakas (1988) 180 CLR 491 at 497. 80 It is common ground that damages had to be assessed by comparing the position in which Mr Baker finds himself with the position in which he would have been had it not been for the misleading (or contravening) conduct. To succeed he had to show a loss caused by the contravening conduct. See Marks v GIO Australia Holdings Limited (1987) 196 CLR 494 at [42]. It is not suggested that the federal magistrate did not at least purport to follow this approach. To the extent that her Honour's decision on this question reveals her reasoning process it indicates that she accepted the concession made by Mr Baker and then his counsel about the value of the cross-claim. 81 Mr Darke contended, however, that the concession as to the gross value should not have been made because it was calculated on the false premise that the amount owing under the mortgage would have to be taken into account. Applying this approach, Mr Baker's share of the damages would be half of the difference between $4.25 million (the counterfactual sale price) and $3.001 million (the actual sale price), i.e. $624,500 plus interest (see [65]). 82 In the alternative, Mr Darke submitted that, if the amount owing under the mortgage is to be taken into account, it must be set off against both the sale price in the counterfactual scenario and the sale price actually achieved. If that is so, the value of Mr Baker's cross-claim would be even greater. That is because the amount outstanding under the loan was so much greater by the time of the actual sale because of the accrual of interest under the loan. Shortly before the time of the projected sale the amount outstanding under the mortgage was at least $3.72 million. Shortly before settlement, the debt had risen to $5,136,688. Thus, (so the argument ran) Mr Baker's position after the sale was that he and Garbake remained in debt to the tune of $2,135,688. On the other hand, if the misleading conduct had not occurred, he and Garbake would have enjoyed the surplus of the counterfactual sale price ($4.25 million) over the amount outstanding under the loan at that time (which both parties were content to assume was $3.72 million), i.e. $530,000. In this alternative approach, Mr Baker's share of the damages would be half of the difference between a profit of $530,000 and a debt of $2,135,688, namely $1,332,844, to which interest must be added. 83 Mr Bedrossian, for Perpetual, contended that damages would be calculated as the counterfactual sale price ($4.25 million) less the amount outstanding under the loan at the time of the counterfactual sale ($3.72 million) and transaction costs of 1.5% on the counterfactual sale ($63,750), plus transaction costs of 1.5% on the actual sale (which would otherwise not have been incurred) ($45,015), giving a total of $511,265, of which Mr Baker would be entitled to half, namely $255,633, to which interest must be added. On this view, whether interest was calculated up until the time of the hearing of the creditor's petition or until the time of the prospective hearing of the Garbake proceeding, the amount Mr Baker would recover if he succeeded on the cross-claim would be less than half the Triprush judgment debt. 84 In my view, Mr Bedrossian is correct. In the counterfactual scenario Mr Baker would not have recovered $4.25 million on the sale of the apartment. At the time he had a debt of at least $3.72 million secured by the apartment. Mr Darke's primary submission was that the mortgage debt should not be deducted because "it was not in any relevant sense causally related to the allegedly misleading conduct". He also submitted that the notion that the amount owing under the mortgage would have to be taken into account rested on a false assumption that, in order to sell the property, the owners would have had to pay out the loan when they could have refinanced. The problem with the argument, however, is that if the sale had gone ahead in early 2008 the effect of Mr Baker's evidence is that he would have discharged the debt. In the cross-claim itself the particulars of loss and damage recite that "had the property sold [at the time the $4.25 million offer was made] the entire loan and mortgage would have discharged …". Mr Baker's evidence was that he would have realised between $400,000 and $600,000 from a sale for $4.25 million. Those figures only make sense if the debt were to have been discharged on the counterfactual sale. Similarly, in his Garbake affidavit Mr Baker stated that, had he sold the property for the amount on offer in early 2008, he "would have been able to fully discharge the alleged debt (the subject of the [Garbake] proceedings) to Challenger/Perpetual" and have a surplus of about $400,000 to $600,000. Her Honour referred to his evidence at [45] of her reasons. In other words, Mr Baker's case, in substance, was that, but for the misleading conduct, he would not have had the debt from early 2008 onwards. For this reason both the principal and the alternative arguments must be rejected. There is an additional reason to reject Mr Darke's alternative argument. The mounting level of interest is a liability to Perpetual from which Mr Baker would be relieved if he succeeded in his cross-claim. It would not sound in damages. Otherwise Mr Baker would receive a windfall. The purpose of damages is not to profit the injured party but to compensate him. Damages, in my opinion, would be assessed as the net amount Mr Baker would recover from a sale in early 2008 together with the difference in the transaction costs. That is the amount that would put him in the position he would have been but for the misleading conduct. It therefore follows that her Honour did not err in concluding that the value of the cross-claim was significantly short of the judgment debt. 85 Nor do I think that her Honour fell into appealable error in refusing an adjournment. Mr Darke argued that it was likely that the cross-claim (as amended) could be heard and determined before the year was out. That may well be so but no evidence was led on the question and Mr Baker did not explain why, despite his expressed intention to do so, he had not yet amended his pleading. I have already said that solvency was not irrelevant. In Re James, where the debtors opposed the making of a sequestration order for a similar reason, Olney J, noting that the debtors had called no evidence to show they were solvent, would not have adjourned the creditor's petition. He said (at 22): Given that the proof of their ability to pay their debts would be a basis upon which the Court could be expected to dismiss the petition, the inevitable inference which must be drawn from the absence of evidence of that ability is that the debtors are not presently, nor would they be upon a successful conclusion of the trade practices proceeding, be able to pay their debts. There is therefore no reason to adjourn the petition. 86 This, in substance, was the same conclusion her Honour reached. 87 Grounds 4 and 5 should be dismissed. Is the foreshadowed claim a claim against the petitioning creditor in the same right? 88 In the circumstances, it is unnecessary to deal with the issue raised by the notice of contention. For completeness, and in deference to the argument, I will nonetheless express my conclusion and the reasons for it. I have come to the view that the point raised by it is not made out. 89 Perpetual claimed that it brought the Triprush proceeding (which culminated in the judgment debt the subject of the creditor's petition) not in its own right but in its capacity as custodian for the JF AQUA Mezzanine Debt Pool. Perpetual asserted that the cross-claim in the Garbake proceeding was brought against it in its capacity as custodian for the Challenger Howard Mortgage Fund ("the Fund"). It suggested, in effect, that the term "custodian" is a synonym for "trustee". It relied on the following statement in Stec v Orfanos [1999] FCA 457 at [24] where the Full Court said: Where a debtor seeks to set aside a bankruptcy notice on the ground that the debtor has a cross demand which equals or exceeds the amount of the judgment or order on which the bankruptcy notice is founded, the judgment on the one hand and the cross demand on the other must be mutual and due in the same right: Re Anderson; Ex parte Alexander (1927) 27 SR (NSW) 296; James v Abrahams (1981) 51 FLR 16 at 27. The requirement that the two claims be "in the same right" is directed to the capacities in which the claimants claim. Thus a claim by a judgment creditor personally cannot be answered by a claim against the creditor as a member of a partnership or as an executor or trustee. See Re Wedd; Ex parte Wedd (1961) 19 ABC 36; Re Molesworth (1907) 51 Sol J 653; Vogwell v Vogwell (1939) 11 ABC 83 at 89. 90 For this reason Perpetual submitted that the principles that apply to the evaluation of the Garbake claim are those that apply to claims against a third party: Ling v Enrobook at 26C–E. Perpetual accepted that it bore the onus of proving that it brought the Triprush and Garbake proceedings in different capacities. It did not allege that it has any particular status by reason of any statutory provision. Rather, its position was, as I said, that when it obtained the Triprush judgment it acted, in effect, as a trustee for a third party. 91 In my opinion the submission fails for want of evidence to support it. 92 The statement of claim in the Triprush proceeding was not tendered. The only reference in the Triprush judgment that comes anywhere close is an observation that the loan document described the lender/mortgagee as "Perpetual Trustee Company Limited as custodian for the JF AQUA Mezzanine Debt Pool". The judgment describes the plaintiff as Perpetual Trustee Company Limited and does not state that the proceeding was brought on behalf of a beneficiary. The judgment was obtained by Perpetual. There is no evidence to suggest that Perpetual brought the creditor's petition on behalf of anyone else. 93 In the Garbake proceeding Mr Baker named Perpetual as a party. He sought damages from Perpetual personally. His foreshadowed claim was against Perpetual itself, not against Perpetual as custodian or trustee or in any other right. It does not matter for this purpose whether, as Perpetual contended, it brought the Garbake proceeding as trustee for a third party. What matters is whether Mr Baker's claim was that Perpetual is "personally liable or liable only as trustee, that is to the extent of the assets of the trust estate and without personal liability". See Re Anderson; Ex parte Anderson (1927) 27 SR (NSW) 296. Mr Baker never suggested he was claiming against the assets of any trust estate. 94 In any case, the evidence about the capacity in which the Garbake proceeding was brought is far from clear. Both the statement of claim and the amended statement of claim do recite that the defendants were obliged to pay principal and interest to Challenger "as trustee" of the Fund. But the defence wholly denies the paragraph in which that allegation is made. The affidavit verifying the statement of claim recites that Perpetual was the custodian for the Fund and Challenger, the trustee of the Fund. Two different people affirmed the verifying affidavits in the original and the amended statements of claim. The inference to be drawn from the verifying affidavits is that there is a difference between the positions of custodian and trustee of this particular fund, but the evidence does not indicate what the position of custodian involved. Although Perpetual contended that there was an express trust, no trust deed was in evidence. The mortgage itself described Perpetual as a custodian for the Fund, although the epitome of mortgage referred to Perpetual as trustee for the Fund. The ambiguities raised in the evidence were never resolved. In any event, there is no evidence to support an inference that the claim Mr Baker was bringing against Perpetual was a claim made "to the extent of the assets of the trust estate and without personal liability". 95 Further, in each case, although it is not entirely clear, it appears that Perpetual sued Mr Baker, not under the mortgage, but under a guarantee, and neither the guarantees nor their terms were in evidence. As Mr Darke submitted, there is nothing to indicate that the rights Perpetual had under the guarantee were rights that it held as trustee for some beneficiary. 96 In the circumstances, I am not satisfied that the claim Mr Baker relies on was not a claim against the petitioning creditor in the same right. Indeed, what evidence there is indicates otherwise. Conclusion 97 Mr Baker has had a measure of success but, on the critical issue of the value of the claim he relies on to offset the debt the subject of the creditor's petition, he has failed. Accordingly, the appeal must be dismissed. I see no reason why costs should not follow the event. Perpetual accepted that her Honour erred in the respects raised by grounds 6, 7 and 9. Those costs, however, should not include the notice of contention. 98 There is one final observation I must make. I referred Mr Baker for legal assistance under r 4.12 of the Federal Court Rules 2011 ("FCR"). Mr Darke was the lawyer who accepted the referral. Although, ultimately, he did not prevail, he gave Mr Baker the best hope he had, and his submissions, both oral and in writing, were of a very high standard. As the point raised in the notice of contention was argued at some length and was the subject of supplementary written submissions, if he is eligible I would be disposed to make an order for costs on the notice of contention in Mr Baker's favour. See FCR r 4.19. I therefore grant him leave to make such an application within seven days. I will assume, unless I hear otherwise by close of business on 8 June 2012, that such an order will not be opposed and I will make it in chambers. I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann. Associate: Dated: 30 May 2012