FEDERAL COURT OF AUSTRALIA Renshaw v Queensland Mining Corporation Limited (No 2) [2016] FCA 1482 Appeal from: Queensland Mining Corporation Ltd v Renshaw [2016] FCCA 979 File number: NSD 678 of 2016 Judge: KATZMANN J Date of judgment: 9 December 2016 Catchwords: BANKRUPTCY — appeal from the making of a sequestration order — whether primary judge erred in failing to find that act of bankruptcy occurred more than six months before presentation of creditor's petition — whether time for compliance with notice extended by orders made under s 41(6A) or by operation of s 41(7) —where petitioning creditor lodged caveat over debtor's land claiming to have security but presented petition as an unsecured creditor, whether primary judge erred in failing to find that petitioner was not an unsecured creditor — where appeal raised alleged errors concerning exercise of discretion under s 52(2) but points not pressed in court below Legislation: Bankruptcy Act 1966 (Cth) ss 3(1)(c), 5, 40(1), 41(1)(g), 41(6A), 41(7), 43(1), 44, 52 Real Property Act 1900 (NSW) s 74F(1) Cases cited: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27 Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Payments Corporation (1985) 1 NSWLR 561 Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 Blatch v Archer (1774) 1 Cowp 63; 98 ER 969 Cain v Whyte (1933) 48 CLR 639 Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Guss v Johnstone [2000] HCA 26; 171 ALR 598 Hall v Richards (1961) 108 CLR 84 J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 Komesaroff v Law Institute of Victoria [1997] FCA 250 Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407 Ling v Enrobook Pty Ltd (1997) 74 FCR 19 Milliman v Rochester Ry Co 3 App Div 109; 39 NYS 274 (1896) James v Abrahams (1981) 34 ALR 657 Queensland Mining Corporation Ltd v Renshaw (2015) 229 FCR 13 Renshaw v Queensland Mining Corporation Limited [2015] FCCA 1555 Streimer v Tamas (1981) 37 ALR 211 Thomson v Golden Destiny Investments Pty Limited [2015] NSWSC 1176 Thorpe v Bristile Ltd (1997) 80 FCR 330 Wright Designed Pty Ltd v McClymont [2006] FCA 999; 232 ALR 683 Date of hearing: 28 November 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 120 Counsel for the Appellant: Mr J Baird Solicitor for the Appellant: Beazley Boorman Lawyers Counsel for the Respondent: Mr N Furlan Solicitor for the Respondent: Jurisbridge Legal Counsel for the Intervener: Mr S Balafoutis Solicitor for the Intervener: Lionheart Lawyers ORDERS NSD 678 of 2016 BETWEEN: HOWARD RENSHAW Appellant AND: QUEENSLAND MINING CORPORATION LIMITED Respondent PAUL GERARD WESTON AS TRUSTEE FOR THE BANKRUPT ESTATE OF HOWARD VICTOR RENSHAW Intervener JUDGE: KATZMANN J DATE OF ORDER: 9 DECEMBER 2016 THE COURT ORDERS THAT: The appeal be dismissed. The appellant pay the respondent's costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT 1 If, amongst other things, a debtor has committed an act of bankruptcy, on a petition presented by a creditor, a court of competent jurisdiction may make a sequestration order against the debtor's estate. That is what happened to Howard Renshaw. While the court has a discretion not to make the order where the debtor can prove he or she is solvent or there is other sufficient cause, the primary judge declined to exercise the discretion in Mr Renshaw's favour. At the hearing of the creditor's petition Mr Renshaw did not contend that he was solvent or that he was not indebted to the petitioning creditor in the amount claimed. He nevertheless opposed the making of the order on three grounds: first, that the act of bankruptcy was committed outside the period in which the creditor was entitled to present the petition; second, that the petition was an abuse of process because the petitioning creditor had failed to disclose that it held security over his property; and third, that, although he could not pay his debts, there was other sufficient cause not to make the order. In this appeal he claims that the primary judge erred in failing to uphold these contentions. Background 2 Queensland Mining Corporation Ltd (QMCL) is a publicly listed company. It was first incorporated as a private company by Mr Renshaw with the intention of acquiring copper and gold mining leases in Queensland: see Queensland Mining Corporation Ltd v Renshaw (2015) 229 FCR 13 (QMCL v Renshaw) at [3]. Mr Renshaw was the managing director of QMCL for a little over eight years until he resigned on 23 October 2012. That day a settlement deed was executed between Mr Renshaw, QMCL, and another company, Butmall Pty Ltd, which was owned and controlled by Mr Renshaw. Under the terms of the deed QMCL made a number of payments, including $270,000 to Mr Renshaw and $264,000 to Butmall. QMCL sued Mr Renshaw, Butmall, and QMCL's accountants for the recovery of the termination payments on the ground that they were made in contravention of s 200B(1) of the Corporations Act 2001 (Cth) because they were benefits given in connection with Mr Renshaw's retirement from the office of managing director without member approval. That action was successful: QMCL v Renshaw. On 5 May 2014 the trial judge, Perry J, made consequential declarations and orders. 3 The declarations included declarations to the effect that Mr Renshaw holds an amount of $270,000 on trust for QMCL pursuant to s 200J(1) of the Corporations Act and, on the same basis, that Mr Renshaw and Butmall hold an amount of $143,333 on trust for QMCL. 4 The effect of the orders so far as it is material is that Mr Renshaw became indebted to QMCL in the amount of $363,000 (how this figure was reached is of no relevant consequence). Mr Renshaw did not repay the debt. The bankruptcy notice 5 On 24 December 2014 a bankruptcy notice (BN 177615) was issued by the Official Receiver, requiring payment, or suitable arrangements for payment, of the judgment debt within 21 days of service. By this time, taking into account post-judgment interest, the debt had risen to $382,273.81. 6 On 7 January 2015 QMCL's lawyers wrote to Mr Renshaw, enclosing the bankruptcy notice and a copy of Perry J's orders of 5 May 2014 upon which the notice was based. According to an affidavit filed in support of the creditor's petition, the documents were served on Mr Renshaw on 8 January 2015, which means that the 21 day period expired on 29 January 2015. 7 One of the circumstances in which a debtor commits an act of bankruptcy, set out in s 40(1) of the Bankruptcy Act 1966 (Cth), is: (g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia … a bankruptcy notice under this Act and the debtor does not: (i) where the notice was served in Australia — within the time specified in the notice … comply with the requirements of the notice or satisfy the Court that he or she 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, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained[.] 8 On 28 January 2015 Mr Renshaw filed an application in the Federal Circuit Court to set aside the bankruptcy notice and, on 9 February 2015, relying on s 41(6A) of the Act, the District Registrar extended the time for compliance up to and including 31 March 2015. The application to set aside the bankruptcy notice 9 Rule 3.02(2) of the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) (Bankruptcy Rules), which were the operative rules in bankruptcy proceedings in that court at this time, required that if an application was based on the ground that the debtor had a counter-claim, set-off or cross demand referred to in para 40(1)(g), the affidavit was to state the full details and the amount of the counter-claim etc, the amount by which it exceeded the amount claimed in the bankruptcy notice, and why it was not raised in the proceeding that resulted in the judgment or order in relation to which the bankruptcy notice was issued (now see Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) r 3.02). 10 In his affidavit filed in support of the application Mr Renshaw asserted that QMCL was indebted to him in the amount of $812,803, made up of damages for breach of contract, including loss of severance pay and superannuation, unpaid holiday entitlements, an unpaid bonus, and an additional sum of $110,000 plus interest. He stated that he could not have brought these claims as a cross-claim in the proceedings in which he was sued, as the damages did not arise until the Court made the orders. 11 Annexed to the affidavit were copies of the following documents: the management contract between Mr Renshaw and QMCL dated 27 November 2011; minutes of a board meeting of QMCL held on 13 December 2012 at which a decision was apparently made to amend the terms of the contract; a letter from QMCL confirming the approval of the payment of a bonus to Mr Renshaw of $110,000; a deed of settlement executed 23 October 2012; an undated set of calculations; and a copy of the bankruptcy notice and attached order, together with the envelope in which they were said to have been delivered. 12 On 4 June 2015 the primary judge heard the application and in an ex tempore judgment dismissed it with costs: Renshaw v Queensland Mining Corporation Limited [2015] FCCA 1555. In his reasons his Honour said that, although Mr Renshaw purported to quantify the amount of a counter-claim, set-off or cross demand, he did not set out full details, nor did he explain why the counter-claim, set-off or cross demand was not raised in the proceeding giving rise to the judgment debt beyond the "bald assertion" (received only as a submission) that he could not have done so because the debt did not arise until after the orders were made. His Honour observed that the requirement under r 3.02 of the Bankruptcy Rules was not satisfied simply by annexing documents purporting to identify a contractual arrangement and the deed of settlement. He held that the affidavit did not comply with the requirements of the rule, declined to dispense with compliance with the rule, and on that ground refused to set aside the bankruptcy notice. 13 The primary judge also said that he was not satisfied that there was a counter-claim, set-off or cross demand of the kind Mr Renshaw alleged in his affidavit. His Honour held that Mr Renshaw was estopped from raising the damages claim for breach of the management contract because in QMCL v Renshaw there was an issue as to whether the agreement had been terminated, which was determined against him (at [112]–[115]). Indeed, Perry J held (at [113]) that there had not been a breach of the agreement. As for the amounts allegedly owing to Mr Renshaw, his Honour held that they were all caught by the deed of settlement which released and discharged QMCL "and the QMC parties" from liability in respect of any claims or potential claims arising out of or "relating to in any way whatsoever … any act or omission by [QMCL]" in connection with Mr Renshaw's position as managing director, director or officer. Finally, his Honour held that Mr Renshaw was estopped from suing in respect of the $110,000 sum under the principles in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 because the claim had been made in an amended cross-claim which was filed in the proceeding before Perry J and later withdrawn. The creditor's petition 14 QMCL filed its petition in the Federal Circuit Court on 30 July 2015. The alleged debt was an amount of $382,273.81 made up of the judgment debt of $363,000 and post-judgment interest. 15 QMCL was not entitled to present the petition unless Mr Renshaw failed to comply with the bankruptcy notice in the period between 30 January 2015 and 29 July 2015 (whether by discharging the debt or establishing that he had a relevant counter-claim etc). That is because s 44(1)(c) of the Bankruptcy Act precludes a creditor from presenting a petition against a debtor unless the act of bankruptcy on which the petition is founded was committed within six months before the presentation of the petition. 16 The act of bankruptcy upon which the petition was founded was Mr Renshaw's failure to comply with the requirements of the bankruptcy notice on or before 4 June 2015 or to satisfy the Court that he had a counter-claim, set-off or cross demand equal to or greater than the sum claimed in the notice which could not have been set up in the action in which the judgment was obtained (see Bankruptcy Act, s 40(1)(g)). 17 Amongst other things, the petition, which was verified by an affidavit sworn by Pipvide Tang on 28 July 2015, stated that QMCL did not hold security over Mr Renshaw's property. In the affidavit Mr Tang said that he was the Chief Financial Officer and Company Secretary of QMCL and the statements of fact made in the petition were "within [his] own knowledge true". 18 On 29 October 2015 Mr Renshaw filed a notice of opposition signifying his intention to oppose the petition on the grounds that: he had not committed an act of bankruptcy within the six months before the presentation of the petition; there was no act of bankruptcy on which to found the petition; he had "an offsetting claim" for an amount exceeding the amount claimed by QMCL which could not have been pleaded by way of "off set" in the proceedings in which QMCL obtained judgment against him; and he was solvent. 19 An affidavit in support of the notice of opposition was filed but not read at the hearing of the petition. Instead, Mr Renshaw relied on selected paragraphs from two later affidavits, sworn 17 February and 26 April 2016, to which I will come in due course. 20 On 26 April 2016 (the eve of the hearing) Mr Renshaw served an amended notice of opposition adding a fifth ground in the following terms: 5. The Creditor's Petition is an abuse of process. Paragraph 2 of the Petition the Applicant claims in the Petition (sic) not to hold security over the property of the Respondent Debtor. This is sworn to be true by Pipvide Tang on 28 July 2015. On 26 June 2014, Pipvide Tang witnessed the signature of Fei Wu on a caveat registered number A1703500H in which Fei Wu claimed the Applicant had a security interest in the property of the Respondent, namely his home at … 21 The next day, soon after the hearing began, Mr Renshaw's then counsel, Mr Johnson, applied for leave to file the amended notice. QMCL objected. Its counsel, Mr Furlan, said: We received it at about 7 o'clock last night. It raises an issue that ought to have been raised long ago. This is nothing new. To the extent to which this caveat has any relevance at all, it has been on [the] title since 2014. Orders have been made by this Court for the filing and service of evidence and for submissions and this is very, very late, obviously the eve of the hearing. It changes things, potentially. If your Honour were to allow it, there would need to be consideration of a number of issues, factual and legal. 22 When asked whether he was in a position to deal with the additional ground, Mr Furlan said that he was not. He said that he had not had time to consider the relevant authorities and the legal point it raised. Ultimately, however, the primary judge granted leave to Mr Renshaw to file the amended notice of opposition. The hearing and judgment below 23 Despite the assertion of solvency in the notice of opposition, Mr Renshaw did not contend that he was solvent. Nor did he press his contention that he had an offsetting claim. His opposition to the petition was based solely on the other grounds. 24 The primary judge dealt with the abuse of process argument first. He rejected the argument on the basis that there was no evidence to establish that any trust monies were applied by Mr Renshaw towards the purchase of the land over which the caveat was lodged. He said that Mr Renshaw was in a position to adduce evidence to this effect but he adduced no such evidence and there was "no evidence to support any basis to believe that those funds are traceable into the land the subject of the caveat". 25 Consequently, his Honour found that QMCL was not a secured creditor. 26 His Honour then turned to consider the question of whether the bankruptcy notice was stale. He found that the act of bankruptcy occurred on 4 June 2015, which was the date he dismissed the application to set aside the bankruptcy notice. 27 Dealing with an argument that the District Registrar's order under s 41(6A) was beyond power, his Honour said: 12 In relation to the contention that the registrar made an order beyond power, reference was made to the decision in James v Abrahams (1981) 34 ALR 657, relevantly at p.662. That case is clearly distinguishable on the basis that on the circumstances in that case, there had been no application to set aside the bankruptcy notice. And the proceedings in which the Registrar made the order of 9 February 2015, the present case, an application had been made to set aside the bankruptcy notice. 13 I should note that even if, contrary to the finding I have made, it was held that there was any excess of power by the Registrar in relation to the making of the order in respect of the extension of time for compliance, it was an order that could have been made under s.33 of the Bankruptcy Act 1966, and the erroneous reference, if it be such, to the wrong source of power would be a defect or irregularity within s.306(2) of the Act. 14 Further, if this was a case in which there was an issue under s.44(1)(c), the Court has power under s.33 to extend time in relation to the six months identified. And this is a case where in the circumstances the Court would have extended the time under s.33 of the Bankruptcy Act 1966 in respect of the requirements under s.44(1)(c). 28 His Honour found that the petitioning creditor satisfied "each of the conditions identified under s.44(1)(a), (b) and (c)" of the Act. 29 Finally, his Honour noted a concession made by Mr Renshaw that he was not solvent and said that he was not satisfied that there was other sufficient cause not to make the order. To the contrary, his Honour said that he was satisfied that this was an appropriate case in which to do so. The grounds of appeal 30 The amended notice of appeal contains four grounds of appeal, although grounds 1 and 2 were each broken up into several sub-grounds. A further amended notice correcting typographical errors in the amended notice was forwarded to my chambers but never filed. 31 The substance of the first ground is that the primary judge erred in failing to find that the act of bankruptcy relied upon in the creditor's petition occurred outside the six month period contemplated by s 44(1)(c) of the Act. In short, Mr Renshaw claimed that his Honour should have found that the bankruptcy notice was served on 8 January 2016, that orders purportedly extending the time for compliance with the notice were beyond power and that the relevant act of bankruptcy therefore occurred 21 days later, on 29 January 2016 with the result that the creditor's petition was filed one day outside the permissible time for presentation. 32 Also under ground 1, Mr Renshaw complained that the primary judge failed to give adequate reasons for rejecting his submission that the creditor's petition was presented out of time, failed to have proper regard to s 41(6A) and (7) of the Act, and erred in finding that if a defect in the extension of time were to exist it could be remedied under s 306 of the Act. 33 The second ground relates to the allegation in the creditor's petition that QMCL was a secured creditor. Mr Renshaw pleaded that the primary judge should have found that the caveat was evidence of a claim by QMCL as a secured creditor, and that his Honour effectively reversed the onus of proof by drawing an adverse inference from Mr Renshaw's failure to lead evidence of the existence of a security. Moreover, he claimed that, in view of Mr Tang's oral evidence, his Honour should have found that QMCL was a secured creditor and that the "commencement and maintenance of the proceedings" constituted an abuse of process. 34 The third and fourth grounds refer to [15] of the primary judge's reasons and complain, in essence, that his Honour erred in failing to find that the evidence of the "asset and liability position" of QMCL and the "asset position" of Mr Renshaw, together with the matters pleaded in grounds 1 and 2, constituted other sufficient cause (within the meaning of s 52(2)(b) of the Act) for not making a sequestration order. 35 By a notice of contention QMCL contends that it was not open to Mr Renshaw to contend below that the act of bankruptcy was not committed within six months before the presentation of the petition, that the requirements of s 44(1)(c) were not satisfied, and that the order made by the District Registrar on 9 February 2015 was beyond power when: the order was never set aside; Mr Renshaw did not appeal from it or apply to have it reviewed; and no appeal was brought from the dismissal of the application on 4 June 2015. 36 QMCL also contends that the primary judge's decision should be affirmed because, by operation of s 41(7) of the Act, the time for compliance with the bankruptcy notice was deemed to have been extended until 4 June 2015. 37 Finally, QMCL contends that the primary judge should have found that Mr Renshaw had abandoned ground 3 of the amended notice of opposition. Was the bankruptcy notice stale by the time of filing of the creditor's petition (ground 1)? 38 The principal question with which this ground is concerned is whether QMCL was entitled to present the petition. The answer turns on whether the Registrar's order extending the time for compliance with the bankruptcy notice was valid or, if not, time was extended by operation of law. A subsidiary question is whether the primary judge gave adequate reasons for concluding that it was. 39 The court has jurisdiction to make a sequestration order in the circumstances set out in s 43(1) of the Bankruptcy Act. Section 43(1) states that: Subject to this Act, where: (a) a debtor has committed an act of bankruptcy; and (b) at the time when the act of bankruptcy was committed, the debtor: (i) was personally present or ordinarily resident in Australia; (ii) had a dwelling-house or place of business in Australia; (iii) was carrying on business in Australia, either personally or by means of an agent or manager; or (iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager; the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor. 40 The conditions on which a creditor may present a petition are prescribed in s 44 of the Act. One of those conditions is relevant to this ground of appeal. Another is relevant to the second ground of appeal. The condition which is relevant to this ground is contained in para 44(1)(c). It is that: the act of bankruptcy on which the petition is founded was committed within 6 months of the petition. 41 The bankruptcy notice was issued on 24 December 2014. Mr Renshaw asserts that it was served on 8 January 2015 and expired on 29 January 2015, because there was no valid extension. Since the creditor's petition was filed on 30 July 2015, the argument runs, the act of bankruptcy on which the petition was founded was committed six months and one day before the presentation of the petition. On that basis, QMCL would not have been entitled to present the petition and the primary judge would have had no power to make the sequestration order. 42 I am not persuaded that the argument is right. 43 Section 41(7) of the Act provides for an automatic extension of the time for compliance in certain circumstances. It reads: Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied. 44 Here, Mr Renshaw had applied to the Court for an order setting aside the bankruptcy notice on the ground that he had a counter-claim, set-off or cross demand which he could not have set up in the proceeding in which the order in favour of QMCL was obtained. Nevertheless, he submitted that s 41(7) was not engaged. This submission, which the primary judge rejected, was based on his Honour's finding on the application to set aside the bankruptcy notice that the affidavit Mr Renshaw had filed in support of his application did not conform to the requirements of r 3.02 of the Bankruptcy Rules. The submission rested on what the Full Court decided in James v Abrahams (1981) 34 ALR 657 (James), which his Honour distinguished on the ground that in that case there had been no application to set aside the bankruptcy notice. 45 The primary judge was correct to distinguish James. 46 In James a judgment creditor served a bankruptcy notice on the debtor. Under the terms of the notice the debtor had 14 days in which to comply with its requirements or satisfy the court that he had a counter-claim, set-off or cross demand of the kind described in para 40(1)(g). Before the 14 days expired, he filed an affidavit in which he alleged that he had a counter-claim, set-off or cross demand against the creditor which exceeded the amount of the judgment debt. In the absence of any valid order extending the time for compliance, Deane and Lockhart JJ explained (at 660) that the failure to comply with the requirements of the notice constituted an act of bankruptcy unless the provisions of s 41(7) were engaged. 47 At the time s 41(7) read as follows: Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has filed with the Registrar an affidavit to the effect that he has such a counter-claim, set-off or cross demand as is referred to in [para 40(1)(g)] … and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied. 48 At the same time, s 41(6A) gave the Court the power, subject to sub-section (6), to extend the time for compliance with a bankruptcy notice where, before the time fixed by the Court or the Registrar for compliance, proceedings to set aside the judgment or order in respect of which the notice was issued had been instituted or an application to set aside the bankruptcy notice had been filed. Subsection (6) provided for deemed compliance in certain circumstances which are not presently relevant. 49 In James the debtor's affidavit set out the factual basis for his allegation and stated that proceedings in respect of it had been instituted in the Equity Division of the Supreme Court of New South Wales, annexing a copy of the pleadings. At first instance, McGregor J found that the debtor (Mr Abrahams) had filed an affidavit or affidavits to the effect referred to in s 41(7). His Honour observed that the Court had not, before the expiration of the time, determined whether it is satisfied that he had such a counter-claim etc. Rather than deciding that question, however, his Honour considered that the court should abide the outcome of the Supreme Court proceeding. He then said that, "though the time for compliance with the bankruptcy notice may be extended by the sub-section", Mr Abrahams should proceed "with all due diligence" to prosecute the Supreme Court action and, if he were not to do so, this Court might not be satisfied "in terms of s 41(7)" or might be satisfied to the contrary. 50 Consequently, his Honour made an order extending the time for compliance with the bankruptcy notice for approximately six weeks or further order on certain conditions, including terms to the effect that he proceed with expedition in relation to his Supreme Court action. When the six weeks lapsed he made another order extending the time for compliance and when that expired he made an order extending the time "until further order". 51 Deane and Lockhart JJ, with whom Fisher J generally agreed, held (at 665) that the affidavit or affidavits filed on Mr Abrahams' behalf failed to assert that he had, for the purposes of para 40(1)(g) a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt. For this reason, their Honours concluded that the affidavit was not, for the purposes of s 41(7) "an affidavit to the effect that [the debtor] has such a counter-claim, set-off or cross demand …", and the time for compliance with the bankruptcy notice was not extended by s 41(7). 52 Deane and Lockhart JJ also held (at 662) that the orders extending the time for compliance with the bankruptcy notice were beyond the Court's jurisdiction and should be set aside. Their Honours said (at 661–2): After the expiry of the time which the bankruptcy notice itself fixed for compliance with its terms and up until the day on which the court determined whether it was satisfied that the debtor had a counter-claim, set-off or cross demand of the type referred to in s 40(1)(g), any order purportedly extending time for compliance would be either otiose or futile. If the affidavit filed by the debtor was to the required effect, the time for compliance with the requirements of the bankruptcy notice was automatically extended by the provisions of s 41(7). If the affidavit was not to the required effect, the time for compliance had expired and the act of bankruptcy had been committed. 53 Noting that no application had been filed with the Registrar to set aside the bankruptcy notice and that no proceedings had been instituted to set aside the underlying judgment or order, their Honours held that the various orders purportedly extending time were not warranted by s 41(6A). Further, their Honours concluded that no general power to extend the time fixed by the Registrar for compliance with the requirements of a bankruptcy notice could be inferred. They reached that conclusion because of the express exclusion of such a power from the general powers to extend time conferred by s 3(1)(c) of the Act and the express grant of power in s 41(6A). 54 In the court below, Mr Renshaw pointed to the finding of the primary judge when dismissing the application to set aside the bankruptcy notice that the affidavit he had filed did not comply with the requirements of r 3.02. Relying on James, he argued that the application was "not a conforming application" so that the deemed extension did not operate. Submissions to like effect were made on the appeal. There are a number of problems with the argument. 55 First, s 41(7) states that time for compliance is deemed to be extended by the filing of the application, not the filing of an affidavit. While an affidavit is required by the Bankruptcy Rules and those Rules prescribe its contents, in the absence of a reference to the relevant rule in the section, r 3.02 could not affect the section's meaning or operation. The evident purpose of r 3.02 is that which the primary judge identified ([2015] FCCA 1555 [6]), namely, to facilitate the timely determination of the question of whether there is a real counter-claim, set-off or cross demand etc. 56 Secondly, s 41(7) has been amended since the decision in James. The amendment was introduced by the Bankruptcy Legislation Amendment Act 1996 (Cth) and remains in force. Mr Renshaw submitted that the amendment "does not provide a proper basis" for distinguishing James or for failing to apply it to the present case. I do not accept the submission. On the face of things, the change in the statutory language is significant. 57 The task of statutory construction necessarily begins with the text; historical considerations cannot displace its clear meaning: see Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27 at [47] and the cases referred to there. The meaning of the current subsection is plain from the text and there is nothing in the context to detract from its plain meaning. The Explanatory Memorandum on the amending Bill and the Second Reading Speech shed no light on the purpose of the amendment. At the time James was decided, the trigger for the operation of the statutory extension was the filing of an affidavit to the effect that the debtor has "such a counter-claim, set-off or cross demand as is referred to in paragraph 41(1)(g)". But that is not the current position. Now the extension comes into effect upon the making of the application on those grounds. Provided that the debtor has made such an application, time for compliance is deemed to have been extended in accordance with the subsection until the date the Court determines whether it is satisfied that he or she has such a counter-claim, set-off or cross demand. 58 This was the conclusion the Full Court reached in Thorpe v Bristile Ltd (1997) 80 FCR 330 at 339. There, Carr J, with whom Burchett J agreed, said that, since the 1996 amendment came into force, it has no longer been a condition of a deemed extension under subs (7) that an affidavit to the requisite effect be filed; the operative condition precedent is that the debtor has applied to the Court for an order setting aside the notice. See also Komesaroff v Law Institute of Victoria [1997] FCA 250. 59 But the change in the legislation is not the only reason to distinguish James. 60 First, the Full Court held that the affidavit was not an affidavit within the terms of the subsection not because it did not conform to the Rules but because the counter-claim, set-off or cross demand did not seek monetary relief. In other words, the affidavit was not to the effect that he had "such a counter-claim, set-off or cross demand as is referred to in para 40(1)(g)". That was not the position here. 61 Secondly, the affidavit may not have complied with r 3.02 but, provided the application answered the description in the subsection, the deeming provision was enlivened. The only basis upon which Mr Renshaw argued that the application he filed was not such an application was because the primary judge held that the affidavit which accompanied it did not comply with r 3.02. But the primary judge did not find that it was not on that account an application under s 41(7) of the Act. More importantly, perhaps, compliance with the rule as to the content of the affidavit is not a condition for the operation of the deeming provision. Nothing in James suggests otherwise. 62 I conclude that the period in which Mr Renshaw could comply with the bankruptcy notice was extended under s 41(7) by the filing of his application to set aside the bankruptcy notice on the grounds set out in his accompanying affidavit. In substance or effect, those grounds amounted to an allegation that he had such a counter-claim, set-off or cross demand as is referred to in para 40(1)(g). 63 Thirdly, in James Deane and Lockhart JJ observed that no application had been made to set aside the bankruptcy notice or to set aside the judgment or order. That is why the Court held that the orders extending the time for compliance with the bankruptcy notice were beyond jurisdiction. Here, however, the application to set aside the bankruptcy notice had been filed before the time for compliance with the requirements of the bankruptcy notice had expired. 64 The Registrar made two such orders. The first order was made on 9 February 2015. It was made by consent. It reads: Pursuant to subsection 41(6A) of the Bankruptcy Act 1966 and rule 3.03 of the Federal Circuit Court (Bankruptcy) Rules 2006, on condition that Bankruptcy Notice No. BN 176821 issued 24 December 2014 was served on the Applicant on 21 January 2015, the time for compliance by the Applicant with the requirements of the Bankruptcy Notice is extended up to and including 31 March 2015. 65 I note that the extension of time was expressed to be conditioned on an event which both parties agree did not take place, namely that the bankruptcy notice was served on 21 January 2015. Mr Renshaw submitted that this meant that the extension was not granted. That may be accepted. 66 The second order, however, made on 5 May 2015, was not conditional. It was in the following form: [T]o the extent the jurisdiction of this Court is engaged, pursuant to subsection 41(6A) of the Bankruptcy Act 1966, time for compliance with requirements of Bankruptcy Notice No. BN 177615 issued on 24 December 2014 be extended up to and including 12 May 2015. 67 It is not to the point that that time had lapsed when this order was made: Streimer v Tamas (1981) 37 ALR 211 at 214–5 (Deane and Ellicott JJ). As the High Court observed in Guss v Johnstone [2000] HCA 26; 171 ALR 598 at [58], citing Streimer: [T]he ineluctable nature of an act of bankruptcy is qualified by the consideration that time for compliance with a bankruptcy notice may be extended even after the time has expired, provided the conditions of s 41(6A) are otherwise satisfied. 68 Here, the conditions for the making of the order were satisfied by the filing of the application to set aside the bankruptcy notice before the expiration of the time fixed for compliance with the notice. 69 For the reasons already given, the jurisdiction of the Court was engaged. 70 Thus, even if the time for compliance with the notice was not deemed to be extended under s 41(7), it was extended by order of the Court on 5 May 2015. Consequently, QMCL was not prevented by para 44(1)(c) from presenting the petition on 30 July 2015. 71 It follows that ground 1 of the amended notice of appeal should be rejected. Did the primary judge err in failing to find that QMCL was a secured creditor, had breached s 44 of the Act, and that the presentation of the creditor's petition was an abuse of process (ground 2)? 72 The question of whether QMCL was or was not a secured creditor is of some importance. A secured creditor may only present a creditor's petition against a debtor in respect of a debt to the extent, if any, by which the amount of the debt exceeds the value of the security or includes in the petition a statement that it is willing to surrender its security for the benefit of creditors generally in the event of the making of a sequestration order against the debtor. The creditor's petition presented by QMCL did not contain any such qualification or statement. Thus, if QMCL was a secured creditor it was not entitled to present the petition and, unless it was given leave to amend it and supplement its evidence, the court would have been obliged to dismiss the petition. 73 I referred to s 44 of the Act above. It is convenient at this stage to set out its terms in full. Section 44 provides: (1) A creditor's petition shall not be presented against a debtor unless: (a) there is owing by the debtor to the petitioning creditor a debt that amounts to $5,000 or 2 or more debts that amount in the aggregate to $5,000, or, where 2 or more creditors join in the petition, there is owing by the debtor to the several petitioning creditors debts that amount in the aggregate to $5,000; (b) that debt, or each of those debts, as the case may be, (i) is a liquidated sum due at law or in equity or partly at law and partly in equity; (ii) is payable either immediately or at a certain future time; and (c) the act of bankruptcy on which the petition is founded was committed within 6 months before the presentation of the petition. (2) Subject to subsection (3), a secured creditor shall, for the purposes of paragraph (1))(a), be deemed to be a creditor only to the extent, if any, by which the amount of the debt owing to him or her exceeds the value of his or her security. (3) A secured creditor may present, or jointly presented, a creditor's petition as if he or she were an unsecured creditor if he or she includes in the petition a statement that he or she is willing to surrender his or her security for the benefit of creditors generally in the event of a sequestration order being made against the debtor. (4) Where a petitioning creditor is a secured creditor, he or she shall set out in the petition particulars of his or her security. (5) Where a secured creditor has presented, or join in presenting, a creditor's petition as if he or she were an unsecured creditor, he or she shall, upon request in writing by the trustee within 3 months after the making of a sequestration order surrender his or her security to the trustee for the benefit of the creditors generally. (6) A secured creditor to whom it subsection (5) applies who fails to surrender his or her security when requested to do so by the trustee in accordance with that subsection is guilty of contempt of court. 74 "Secured creditor" is relevantly defined in relation to a debtor in s 5 of the Act as: a person holding a mortgage, charge or lien on property of the debtor as a security for a debt due to him or her from the debtor. 75 By ground 2 of the amended notice of appeal Mr Renshaw alleged that the primary judge erred in the following respects: (a) in failing to find that the caveat lodged by QMCL over his property amounted "on the evidence which was before [the court]" to a claim by QMCL to be a secured creditor; (b) in not finding that QMCL had breached s 44(3), (4), (5) and (6) of the Bankruptcy Act; (c) by, "in effect", reversing the onus of proof and drawing an adverse inference from his failure to lead evidence of the security despite the requirement in s 52(1)(a) of the Bankruptcy Act that the petitioning creditor prove the matters stated in the petition; (d) in finding that QMCL was not a secured creditor in the face of the evidence from Mr Tang that he was a witness to the caveat and an accountant and that the caveat was prepared by QMCL's lawyers "to secure debts"; (e) in failing to find that the creditor's petition was an abuse of process because QMCL did not disclose its security interest; (f) in failing to follow Wright Designed Pty Ltd v McClymont [2006] FCA 999; and (g) "in failing to find that the commencement [or] maintenance of the proceeding in the circumstances of the verification on the face of the claim for security in the Caveat did not amount to an abuse of the process of the Court". 76 During the course of the hearing Mr Renshaw did not press the allegation that the presentation of the petition was an abuse of process. Nor did he submit that the evidence established that QMCL was a secured creditor. In these circumstances, many of these allegations fall away. Those that remain are contained in (a), (c), (d) and possibly (f). 77 Mr Renshaw argued that, on its face, the caveat was at least an assertion by QMCL that it had an equitable charge or lien over Mr Renshaw's property of the "kind" that fell within the definition of "secured creditor" in s 5 of the Act. Moreover, according to Mr Renshaw, the caveat was "also sworn evidence that [QMCL] had such a security". 78 Schedule 1 to the caveat described the "estate or interest claimed" in the following way (without alteration): Equitable interest in proportion to amount trust monies in which Caveator is beneficially entitled by virtue of s 200J of Corporations Act (trust monies), applied by Howard Victor Renshaw to the land, and/or equitable charge or lien, over the land to secure repayment of trust monies applied to the purchase of the land by Howard Victor Renshaw. (Emphasis in original). 79 This interest was said to arise by virtue of the following facts: Trust created by virtue of s 200J of the Corporations Act as determined by orders of the Federal Court of Australia dated 5 May 2014, File Number NSD 1308 of 2013 80 I interpolate that s 200J of the Corporations Act relevantly provides that: (1) If an entity (the giver) contravenes section 200B by giving a benefit to a person (the recipient), then the amount of the benefit, or the money value of the benefit if it is not a payment: (a) is taken to be received by the recipient on trust for the giver; and (b) must be immediately repaid by the recipient to the giver. 81 By statutory declaration one Fei Wu, a director of QMCL, declared that to the best of his knowledge, information and belief QMCL had "a good and valid claim to the estate or interest set out in Schedule 1". The declaration was made and subscribed before Mr Tang, who is, or was then, apparently a justice of the peace. 82 There is no doubt that the caveat was an assertion or claim by QMCL that it had a charge or lien over Mr Renshaw's property. I do not understand the primary judge to have found otherwise. But that is by no means the end of the matter. 83 It will be recalled that Mr Tang verified as true to his own knowledge the statement in the petition that "[t]he applicant creditor does not hold security over the property of the respondent debtor". 84 Mr Renshaw submitted that QMCL stated in the creditor's petition that it did not hold security over Mr Renshaw's property and that it was required to prove that. He noted that Mr Tang had deposed to that in the affidavit verifying the petition and that s 52(1)(a) entitles the court to accept the affidavit as sufficient proof. Mr Renshaw contended, however, that in the circumstances his Honour could not have done so. 85 The primary judge questioned Mr Tang, who (at the last minute) was required for cross-examination. His Honour asked him whether it was his understanding that the payments Mr Renshaw received from QMCL under the settlement deed were applied by him in the acquisition of a property. Mr Tang replied (without alteration): I can't comment on that. I'm not 100 per cent sure about that. I joined the company only in about 2013 and that arrangement obviously prior to my employment with [QMCL]. 86 The following exchange then took place: HIS HONOUR: So is this the position: you don't really know one way or the other whether the property over which the caveat has been lodged was in fact purchased with the funds that were paid by the company from termination of Mr Renshaw's employment that are the subject of the section 200J order by Perry J? Is that right? --- I don't know. I don't know that. 87 In cross-examination Mr Tang was taken to the caveat and asked to identify his signature. He agreed he had witnessed Mr Wu's signature but he said he could not remember whether he had read the document before Mr Wu signed it. He agreed that he knew about the caveat at the time he swore the affidavit verifying the creditor's petition. He was asked what inquiry he made about the security referred to in the caveat. His answer is difficult to understand from the transcript, in part, because the record of it includes an ellipsis: I'm not sure about a caveat is the security. That's not what I understand. They are … caveat is–is security. But his Honour took him to be saying that he was not sure that a caveat is the type of security that is being referred to in the petition. Either way, however, the answer was non-responsive. 88 He was then asked what inquiry he made about security for the purposes of the creditor's petition. He replied: The company haven't got any security on any asset, as far as I understand, or the property of Mr Renshaw. That is what I understand by for the – the access to the company documents and accounts. And whether the caveat and security – as far as I understand and my knowledge, they are not the same. 89 Finally, Mr Renshaw was asked if he knew whether or not QMCL asserts that it has an interest in land owned by Mr Renshaw "as identified in the caveat", he replied: Well, the caveat as far as I understand, it is just something that register in the Land Office, just in case Mr Renshaw wants to deal with the property, say, for example, to sell or whatever. He needs to get our – inform us – inform [QMCL] about it. And we haven't got any equity interest in that particular asset or property, and we can't sell — as [QMCL] is concerned, we can't sell. We can't do – we can't even occupy the property. 90 In sum, then, Mr Tang did not resile from what he had said in his affidavit. Although he knew that there was a caveat, he insisted that QMCL did not have an equitable interest in the property. 91 Mr Johnson did not seek to impugn Mr Tang's credit and he did not ask the primary judge to reject his evidence. There was a suggestion at one point that his credit would be an issue (see Pt C p 381) and cross-examination was permitted on a limited basis relating to his knowledge of the caveat. It is clear, however, that the cross-examination went further. In any event, no complaint is made in the amended notice of appeal (or for that matter in submissions) about the limitation of the cross-examination. 92 Any person who claims to be entitled to a legal or equitable estate or interest in land under the provisions of the Real Property Act 1900 (NSW) may lodge a caveat: Real Property Act, s 74F(1). Thus, the lodgment of a caveat is merely a claim by the caveator that (s)he has an estate or interest in the land; it operates so as to prevent registration of a later dealing until the caveator has had an opportunity to establish his or her claim (J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 552 (Barwick CJ)) and perhaps also to "serve as a notice to anybody interested in the land, and troubling to search the Register, that there was some other dealing or transaction on foot of which any interested person should be aware" (Black v Garnock (2007) 230 CLR 438 at [76] (Callinan J)). As Gaudron J put it in Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407 at 428 "[t]he essence of a caveat is that it claims an estate or interest in land" (emphasis added). In his statutory declaration Mr Wu was making such a claim. 93 The right of a caveator, who is the beneficiary of a judgment, to block dealings by the debtor while the judgment remains unsatisfied does not create any charge or lien over the property; the entry of the caveat does not create any new rights: Hall v Richards (1961) 108 CLR 84. In Hall v Richards at [92] Kitto J explained: The legal effect of the caveat, as has often been said of caveats under the ordinary caveat provisions of Torrens legislation, was that of a statutory injunction, serving merely to keep property available in case the judgment creditor should wish to have execution against it; and it is clear on the authorities … that to apply the term 'lien', or even the term 'charge' to anything which has no greater effect than that is to depart from the terminology of the Bankruptcy Act. 94 True it is, a person must have "reasonable cause" to lodge a caveat and may be ordered to pay compensation if (s)he does not: Real Property Act, s 74P. "Reasonable cause", however, does not require that the person have a caveatable interest; a person has reasonable cause where (s)he has an honest belief based on reasonable grounds that (s)he has a caveatable interest: Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 at 472 (Clarke JA, Kirby P agreeing at 462). 95 The mere existence or creation of a trust relationship, whether constructive or otherwise, is not enough. The caveatable interest must be grounded either in an agreement entered into by the registered proprietor of the land or by an interest binding on the registered proprietor: Thomson v Golden Destiny Investments Pty Limited [2015] NSWSC 1176 at [316]–[324] (Sackar J). 96 At one point in his submissions Mr Renshaw submitted that there was a temporal connection between the receipt of the money pursuant to the deed of settlement and the purchase of the property. But the evidence does not establish when the property was purchased. Mr Renshaw himself said nothing about the subject. His counsel was only able to point to a title search upon which the date 11 March 2013 appeared beside the words "edition no 8". That evidence is, at best, equivocal. 97 Later, however, Mr Renshaw did not submit that the evidence proved the existence of a caveatable interest. Rather, he submitted that in the light of the evidence as to the caveat, the primary judge "could not accept at face value" what Mr Tang had said in his affidavit. That may well be correct. But it is not apparent that the primary judge accepted what Mr Tang said "at face value". For a start, the affidavit was not the only evidence. His Honour also had the benefit of Mr Tang's oral evidence. What is more, he also had evidence from Mr Renshaw which did not call that evidence into question. 98 As the petitioning creditor, QMCL carried the legal onus of satisfying the court that it did not hold security over Mr Renshaw's property. Contrary to Mr Renshaw's contention, the primary judge did not reverse the onus. Certainly, in considering whether he was so satisfied, his Honour took into account Mr Renshaw's silence on this matter. He was entitled to do so. After all, Mr Renshaw was in the best position to give evidence as to what he had done with the trust monies. As the learned author of the latest Australian edition of Cross on Evidence explained at [7165]: Where one party bears the burden of proving a negative but the other has greater means to produce evidence to contradict the negative proposition, then provided the party bearing the burden of proof has tendered some evidence from which the negative proposition may be inferred, the other party carries a tactical burden to advance in evidence any matters with which (if relevant) the first party would have to deal in the discharge of its legal proof. (Citations omitted) 99 In Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Payments Corporation (1985) 1 NSWLR 561 at 565 Hunt J said that the above principle derived from the maxim in Blatch v Archer (1774) 1 Cowp 63 at 65, 66; 98 ER 969 at 970, that all evidence is to be weighed according to the proof which it is in the power of one side to produce and of the other to contradict. 100 Mr Renshaw's silence entitled the court to infer that there was nothing he could say which would have assisted his case on this question: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418 (Handley JA). In that case Handley JA cited with approval the following remarks in the judgment of the Appellate Division of the Supreme Court of New York given by Follett J in Milliman v Rochester Ry Co 3 App Div 109; 39 NYS 274 (1896) at 276: In case a litigant fails to produce a person known to be friendly to him and to his cause, who is so situated that he must have knowledge of the facts in issue, the jury is permitted to presume that the testimony of that person would not have been favourable to the party … The existence of this rule is not disputed but it is urged that it is not applicable to this case because the daughter was produced as a witness, and that no presumption arises from the plaintiff's failure to interrogate her, that her testimony would have been unfavourable to him. I think the rule is as applicable to a case in which a party fails to interrogate a friendly witness, so situated as to be presumed to have knowledge of the existence or non-existence of the vital facts in issue, as it is to the case of a failure to produce such a witness. Indeed I think the omission to interrogate a friendly witness in respect to facts presumably within his knowledge is more significant than the failure to call such a person as a witness, and that the presumption that the testimony would not have been favourable to the party's case is stronger than the one which arises from the failure to produce such a person as a witness. 101 The statements in the caveat were not admissions by QMCL against interest. They were self-serving. Moreover, Mr Wu was expressing an opinion in his statutory declaration based on hearsay. If there were any facts to support the opinion, they were not in evidence. In these circumstances Mr Wu's evidence was not entitled to any weight. In the face of Mr Tang's evidence and in the absence of any evidence tracing the monies paid to Mr Renshaw under the settlement deed to the purchase of the property, there was no reliable evidence to undermine Mr Tang's sworn evidence. 102 Taken at its highest for Mr Renshaw, the evidence might demonstrate that the caveat was lodged without reasonable cause or even in bad faith. But it did not prove that QMCL was not a secured creditor. 103 For these reasons Mr Renshaw's reliance on Wright Designed Pty Ltd v McClymont [2006] FCA 999; 232 ALR 683 is misplaced and the primary judge was correct to distinguish it. There, the creditor who did not disclose in the petition the existence of a security was found to have a charge over the debtor's land and so to be a secured creditor. 104 The primary judge's reasons, though brief, were not appealably inadequate. 105 Ground 2 should also be rejected. Did the primary judge err in finding that there was no sufficient cause not to make the sequestration order (grounds 3 and 4)? 106 The short answer to the question is "no". 107 In his written submissions Mr Renshaw contended that the primary judge should have found that there was sufficient cause not to make the sequestration order because of: (1) Mr Tang's failure to disclosure QMCL's alleged security in the land; (2) Mr Renshaw's asset position; and (3) the existence of an offsetting claim he "wishes to establish … against LawCover for damages arising from the deed prepared by his [then] solicitor and any claims he has remaining against [QMCL]". 108 He also contended that the primary judge's reasons for not so finding were inadequate. 109 Having regard to my earlier conclusion, the first matter falls away. 110 In relation to the second matter, Mr Renshaw pointed to evidence before the primary judge that the property had a value of $2,000,000 subject to a mortgage to the ANZ Bank of $980,000, thus leaving equity in the property of $1,020,000 of which he, as one of two owners, had a half share. I note that on 17 February 2016 Mr Renshaw deposed that, besides the mortgage, his other debts totalled $156,100. 111 As I mentioned above, the ground of appeal to which this matter relates (ground 4) arises from [15] of the primary judge's reasons, which Mr Renshaw contends (in ground 5) are inadequate. At [15] his Honour said this: Mr Johnson of counsel on behalf of the respondent [Mr Renshaw] also submitted that the Court should be satisfied in the present case that there was other sufficient cause not to make a sequestration order. Given the position conceded that the respondent is not solvent, I am not satisfied that other sufficient cause not to make a sequestration order has been made. I am satisfied that the respondent is unable to pay his or her debts. I am satisfied that the respondent has committed an act of bankruptcy and I am satisfied that this is an appropriate case in which to exercise the Court's powers to make a sequestration order against the estate of the debtor. 112 At first blush, the relevance of this matter was elusive. Neither in the amended notice of appeal nor in the opening written submissions did Mr Renshaw explain the relevance of his "asset position" in circumstances in which he did not contend that he was solvent. 113 To understand how the matter was put in the court below, it was necessary to go to the transcript: We say your Honour has before you evidence of a value of a property over which a caveat has been lodged, and I'm not going to repeat what I've already said about the caveat. You have evidence of the value of that property. You have evidence of the amount secured against that property and the interest of Mr Renshaw in that property. In those circumstances, your Honour would be satisfied that this is not an appropriate means to recover the indebtedness where the very petitioning creditor has sought to restrict use of that property if there is no valid caveat creating a – what I might say – a footprint – I will use the word "footprint" rather than "security interest" – on that property, that they haven't exercised any of those other rights where there's evidence of the value. And for that reason, the petition ought be dismissed on that ground. 114 That is not, however, the way the matter was put on appeal. 115 In both submissions in reply and in oral submissions, Mr Baird of counsel (who had taken over the brief for Mr Renshaw from Mr Johnson and had not settled the pleading or the opening submissions) put a completely different argument. In particular, he eschewed the proposition put to the primary judge that Mr Renshaw's evidence concerning his "asset position" meant that the petition should be dismissed. Instead, he argued that the surplus of assets over liabilities meant that the bankruptcy would be of short duration and the creditor's petition should therefore have been adjourned. 116 The basis for this argument was that by selling the property and realising Mr Renshaw's half share, the trustee would have more than enough money to pay out the creditors. Mr Baird made it clear that the argument was contingent on the success of his contention that he had an "offsetting claim" against LawCover (the third matter referred to in [107] above). That contention in turn was based on the observations of the Full Court in Ling v Enrobook Pty Ltd (1997) 74 FCR 19 at 25–6 that: [a] review of the authorities discloses that in certain circumstances, but not in all circumstances, the fact that the debtor has pending before a court a legitimate claim to funds sufficient to satisfy the petitioning creditor's debt will amount to "other sufficient cause" not to make a sequestration order ... 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. 117 The submission and the grounds of appeal to which it attaches must be rejected. 118 The third matter (the so-called offsetting claim) was the subject of the fourth ground of opposition to the creditor's petition. Yet, that ground was not pressed in the court below and it was not the subject of any ground of appeal. When these circumstances were drawn to Mr Baird's attention, he quite properly abandoned the point. In any event, assuming that the alleged claim against LawCover was "a legitimate claim to funds sufficient to satisfy the petitioning creditor's debt", there was no evidence before the primary judge or this Court that a claim against LawCover was indeed pending before a court, let alone that the litigation was so well advanced to enable the court to conclude that Mr Renshaw's insolvency is likely to be only of short duration. 119 Consequently, grounds 3 and 4 should also be rejected. Conclusion 120 For the foregoing reasons the appeal should be dismissed with costs. I certify that the preceding one hundred and twenty (120) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann. Associate: Dated: 9 December 2016