I certify that the amount payable by the Guarantor, Mr Gary Baker, under the Guarantee executed by him and dated 27 th October 2006 in relation to the above Facility is as follows:
1. The amount payable as at 21 st October 2009 at the time the Default Notice and Letter of Demand was sent to Mr Baker was $688,147.40
2. The amount payable as at 30 th November 2009 was $704,535.75
3. The amount payable as at 15 th June 2010 was $788,351.57
I am authorised to make this certification"
14 Mr Vella has admitted that the figure provided by him in paragraph 2 of the Certificate contains an error. The amount of $704,535.75 is incorrect and should be $704,535.19.
15 Counsel for Mr Baker submitted that the document above does not constitute a Lender's certificate pursuant to clause 9.3 of the Deed of Guarantee because, firstly, it has not been signed by Perpetual Trustee as the lender or its solicitors; secondly, there is no evidence that it has been signed by Mr Vella on Perpetual Trustee's behalf; and thirdly, it was not open to inference that Mr Vella signed the document on perpetual Trustee's behalf in circumstances where (a) Mr Vella is not an officer or employee of Perpetual Trustee, (b) the document is on "Balmain AQUA Pty Limited" letterhead, Mr Vella's employer and (c) there is no evidence of any relationship between Balmain AQUA and Perpetual Trustee which would properly give rise to such an inference and, finally, the Certificate contained a manifest error namely that paragraph 2 of the amount was incorrect by the sum of 56 cents.
16 The loan document referred to the borrower as Triprush Pty Limited and Gilsong Pty Ltd. The lender/mortgagee was described as Perpetual Trustee Company Limited as custodian for the JF AQUA Mezzanine Debt Pool. The responsible entity was described as James Fielding Funds Management Limited and the responsible entity was the operator of the mortgage trust scheme funding the loan. The investment manager of the fund was described as JF AQUA Pty Limited.
17 While the role of JF AQUA Pty Limited was explained in the loan document, the Deed of Guarantee document does make any reference to JF AQUA Pty Limited as being the investment manager. JF AQUA Pty Limited had changed its name as set out in an ASIC search.
18 Mr Vella deposed that (Aff 28/7/10) he signed the Certificate and at that time he signed it he was authorised to do so by Perpetual Trustee. He says that his authorisation to sign the Certificate arose from the role and responsibility of Balmain AQUA Pty Ltd as the investment manager of the mortgage fund scheme.
19 Counsel for Perpetual Trustee submitted that paragraph 3 of the Certificate is the operative one as it is what is relied upon to ground the statement of claim. Further, Perpetual Trustee says that the error contained in paragraph 2 of the Certificate can hardly be described as "manifest". Perpetual Trustee submitted that clause 9.3 only requires that the Certificate be "signed by or on behalf of the Lenders or its solicitors" and Mr Vella was authorised and did sign on behalf of the Lender.
20 There is no mention to the lender Perpetual Trustee contained in the Certificate. Nor does Mr Vella state the source of his authorisation to act for perpetual Trustee in the Certificate. It is my view that it is at least arguable that the Certificate does not comply with Clause 9.3 of the Deed of Guarantee. However, Perpetual Trustee does not need to rely upon the Certificate. The records of the account are in evidence and they disclose that the sum of $788,351.37 is owed as at 16 June 2010. That is sufficient evidence to show the amount that is due and payable under the Deed of Guarantee.
Equitable set off
21 Mr Baker's claim for set off is said to arise from moneys claimed by Mr Baker in a cross-claim filed in Supreme Court proceedings No 2009/297367 ("the Montpensier proceedings"). The Montpensier proceedings involve a separate claim by Perpetual Trustee against a borrower (Montpensier Pty Ltd) and against Mr Baker as guarantor of that loan facility.
22 In the Montpensier proceedings, Mr Baker's cross claim makes various allegations against each of the cross defendants, including Perpetual Trustee and the valuer. The cross claim pleads the nature and extent of the damages, which are alleged to have been suffered by him as a result of the conduct of the various cross-defendants. He pleads that the damages he "has suffered damage equal to the liability accrued to him by reason of the guarantee" and that he "has suffered loss and damage equal to the amount of his liability pursuant to the guarantee". So even if Mr Baker is entirely successful in his cross claim in the Montpensier proceedings, such success could only possibly result in him being relieved of liability under his guarantee of the loan relevant to those proceedings (the Montpensier loan). Therefore, on his own cross claim there will not be any 'surplus' funds available to him which would constitute the basis for an equitable set off for the purpose of these proceedings. In my view pleading the equitable set off raised in the amended defence in these proceedings is doomed to failure.
23 According to Perpetual Trustee, even if there was the potential for there to be some surplus funds coming to Mr Baker by reason of his cross claim in the Montpensier proceedings, his assertion of an available equitable set off in these proceedings suffers from three further flaws, namely, the agreement between the parties as recorded in the guarantee dated 27 October 2006 expressly excludes any right of set off on the part of Mr Baker (see clause 9.10); secondly, that it is well established that a right to a set off could be excluded by agreement between the parties (see Eureka 2 Holdings Pty Limited v Palasty [2010] NSWSC 526 at [24] per Price J); and finally, a claim for a set off must arise from a claim that is sufficiently closely connected to the initial claim, such that having regard to that closeness and to the general conduct of the parties, it would be unjust or inequitable for the plaintiff to be able to bring its claim (see, for example, AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 at 712 and Commonwealth Development Bank v Windemere Pastoral [1999] NSWSC 518 at [58]-[59] per Rolfe J).
24 Perpetual Trustee submitted that there is insufficient closeness or connection between the Plaintiffs claim in these proceedings and Mr Baker's cross claim in the Montpensier proceedings for an equitable set off to exist. They are two separate claims in respect of entirely different loan transactions.
25 As the damage claimed in the cross claim will not give rise to a surplus it is unnecessary to decide whether there is a close connection between these proceedings and the Montpensier proceedings.
26 It is my view that Mr Baker's defence is doomed to failure. The defence should be struck out. Judgment should be entered in favour of Perpetual Trustee in the sum of $788,351.37.