The plaintiff, Integrated Green Energy Solutions Limited ACN 003 669 163 (IGE), is a publicly listed company.
By originating process filed on 4 December 2020, IGE applies pursuant to s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand issued to it on 4 June 2020 by the defendant, Mac Wealth Holdings Pte Limited (MWH) (the demand).
Paragraph 1 of the demand states that IGE owes MWH "in its own capacity and as trustee for Mac Wealth Holdings (Singapore) … the amount of $12,400,000, being the amount of the debt described in the Schedule". The Schedule refers to a judgment for the sum of $12,400,000 entered on 27 May 2020 in proceeding 2019/356570. MWH is named as the "plaintiff" in whose favour that judgment is entered. The judgment does not record whether MWH, as the plaintiff in those proceedings, was acting in its capacity as trustee for Mac Wealth Holdings (Singapore) and/or in its own capacity.
It was common ground that the statutory period within which IGE may apply to set aside the demand was six months, and that the originating process was filed within that statutory period.
IGE applies to set aside the demand on two grounds that are closely related:
1. first, IGE contends that there is a genuine dispute about the existence of the debt to which the demand relates because the judgment entered on 27 May 2020 was entered in favour of MWH, whereas the demand described the judgment debt as owing to MWH "in its own capacity and as trustee for Mac Wealth Holdings (Singapore)": Corporations Act, s 459H; and
2. second, because there is no judgment debt owing to MWH in its capacity as trustee, the debt described in the demand in the terms recounted above is not a judgment debt and the demand was not accompanied by the affidavit that is therefore required by s 459E(3) of the Corporations Act. IGE contends that the absence of the s 459E(3) affidavit is "some other reason" to set aside the demand under s 459J(1)(b) of the Corporations Act.
In its written submissions served prior to the hearing, IGE disavowed any reliance on s 459J(1)(a) of the Corporations Act, which would have required it to demonstrate a defect in the demand that would result in substantial injustice if the demand were not set aside. IGE also abandoned the additional contention raised in its originating process and propounded in the supporting affidavit of its director, Mr Stuart Clark, that the demand should be set aside because it was not served on IGE.
For the reasons that follow, I have concluded that there is no genuine dispute about the existence of the debt to which the demand relates. Section 459E did not require the demand to be accompanied by an affidavit because the demand relates to the judgment debt arising from the judgment entered in favour of MWH on 27 May 2020. It follows that the absence of an affidavit is not "some other reason" to set aside the demand under s 459J(1)(b).
[2]
Consideration and determination
IGE submitted that:
"A company in its own right and a company as trustee are legally and factually distinct concepts and there is nothing on the face of the judgment to suggest that it was issued to [MWH] in those two distinct capacities."
It followed, in IGE's submission, that there is a genuine dispute as to the existence of the debt to which the demand relates.
Senior counsel for IGE acknowledged that a trust is not a separate legal entity under Australian law, and that the legal personality of an entity does not change according to whether it enters into a transaction in its capacity as trustee of a trust or in its own capacity. However, senior counsel nevertheless submitted that a judgment entered in favour of any entity (without specifying that the judgment sum is owed to the judgment creditor in its capacity as trustee) does not create a judgment debt owed to the creditor in its capacity as trustee (or at least that there is a genuine dispute about this in this case).
Senior counsel for IGE submitted that the question whether a creditor was entitled to recover a debt in its capacity as trustee or in its own capacity is important where the creditor ceases to be the trustee of the relevant trust before the debt is recovered. In that scenario, senior counsel submitted that debts owed to the creditor in its capacity as trustee can be novated or pass to the new trustee by operation of law.
The scenario raised by senior counsel is irrelevant to the present case. IGE's submissions rested solely on the difference between the reference to MWH "in its own capacity and as trustee" in paragraph 1 of the demand on the one hand, and the judgment in favour of MWH (with no reference to it acting as trustee) on the other hand. Senior counsel for IGE stated that IGE does not dispute that it owes the judgment debt to MWH and "there would be no debate" if MWH had not chosen in the demand "to expand upon the judgment debt by saying that the debt is owed in its own capacity and as trustee". Senior counsel submitted that IGE was entitled to say to MWH that it does not owe the debt as described in the demand "because the judgment is not in your own capacity and as trustee".
MWH submitted that it is clear from the demand that it relates to the judgment debt entered on 27 May 2020.
MWH acknowledged that the judgment is in favour of MWH without reference to any particular capacity in which MWH might hold any monies received in satisfaction of the judgment, but submitted that it does not follow that there is a genuine dispute about the existence or amount of the judgment debt. In MWH's submission, the reference in the demand to the debt being owed to MWH in its own capacity and its capacity as trustee is, at most, a minor misdescription of the debt or the creditor. MWH submitted that any such misdescription constituted a defect in the demand which falls to be addressed under s 459J(1)(a) if the defect will cause substantial injustice if the demand is not set aside. MWH noted that IGE did not rely on s 459J(1)(a), but submitted for completeness that the defect would not cause substantial injustice in all of the circumstances of this case.
I reject IGE's submissions referred to at [8]-[12] above. The legal personality of an entity that enters into a transaction in its capacity as a trustee is not qualified or different by reason of the fact that it enters into that transaction in that capacity. Its rights and liabilities arising out of the transaction are personal. That is a consequence of the fact that the trust is not a separate legal entity. The trustee will be obliged to hold rights acquired under the transaction on the terms of the trust, and it will be liable to the beneficiaries of the trust if it fails to do so. But that does not affect the fact that the trustee is the entity to which the counterparty to the transaction owes the corresponding obligation or liability: see ACES Sogutlu Holdings Pty Ltd (in liq) v Commonwealth Bank of Australia [2014] NSWCA 402 at [11]-[20] (Leeming JA, Beazley P and Macfarlan JJA agreeing) (ACES Sogultlu Holdings); see also ALYK (HK) Limited v Caprock Commodities Trading Pty Ltd [2015] NSWSC 1006 at [21]-[26] and the authorities there cited, include ACES Sogutlu Holdings; see also Retail Employees Superannuation Pty Ltd v AMP Capital Investors Limited [2013] NSWSC 1633 at [15]-[17].
I accept MWH's submission that it is clear from paragraph 1 of the demand that it relates to the judgment debt entered on 27 May 2020 that is referred to in the schedule. For the reasons explained immediately above, the addition of the words "in its own capacity and as trustee for Mac Wealth Holdings (Singapore)" after the name of MWH as the plaintiff in proceeding 2019/356570 would have been mere surplusage. Those words appearing after the name of MWH in paragraph 1 of the demand are mere surplusage and do not give rise to a genuine dispute about the existence of the debt described in paragraph 1.
I reject IGE's submission that the present case is analogous to Riverlands Club Holdings Ltd v Suzy David Trading as David Legal [2008] NSWSC 1065 (Riverlands Club Holdings). In that case, the Court held that there was a genuine dispute about the existence of the debt described in the statutory demand as owing to Suzy David t/as David Legal because the judgment referred to in the statutory demand as having been entered in respect of the debt was entered in favour Suzy David and Fred David t/as David Legal. The Court held that the judgment debt was owing jointly to two persons, whereas the statutory demand was predicated on the existence of a debt owing to only one of those persons. The joint debt could be discharged by payment to one of the two persons to whom it was owed, but it did not follow that there was in existence a debt owed to one person only. The statutory demand was set aside on the basis that there was a genuine dispute as to the existence of a debt owed to the one creditor named in the demand.
For the reasons I have explained above, the demand in this case relates to the judgment debt owed to MWH, being the same legal entity that has issued the demand and is referred to in paragraph 1 of the statutory demand. The matters raised in IGE's submissions do not constitute a genuine dispute about the existence of that debt. On the contrary, the dispute is illusory, spurious or misconceived. It turns solely on the inclusion of the words "as trustee for Mac Wealth Holdings (Singapore)" in paragraph 1 of the demand. These words do not alter or affect the identity of the creditor or the existence or nature of the debt owed to that creditor: see Re Essential Media and Entertainment Pty Ltd [2020] NSWSC 990 at [77]-[81] for a convenient summary of the authorities concerning the threshold for a "genuine dispute", including Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 464.
That is sufficient to dispose of the first basis of IGE's application to set aside the demand. However, a further reason why I am not satisfied that there is a genuine dispute is that, on the plaintiff's own evidence, the judgment debt was entered in favour of MWH pursuant to clause 7 of a Deed of Settlement and Release entered into by IGE and its related entities (collectively the IGE Parties) and MWH "in its own capacity and as a trustee for Mac Wealth Holdings (Singapore)". Clause 7 provided that the IGE Parties irrevocably consented to judgment being entered in favour of MWH in proceedings 2019/356570 in the amount of $12,400,000 if the IGE Parties did not make certain payments specified in that clause. The IGE Parties did not make those payments and IGE does not dispute that MWH was entitled to enter the judgment. [1]
That disposes of the first basis of IGE's application to set aside the statutory demand. IGE's second basis fails for the same reasons. The debt to which the demand relates is the judgment debt in favour of MWH. Accordingly, s 459E(3) of the Corporations Act applies and it was not necessary for the demand to be accompanied by an affidavit verifying that the debt is due and payable to the legal entity MWH in any particular capacity. The absence of an affidavit is not "some other reason" to set aside the demand under s 459J(1)(b).
As will be apparent from the above, I do not consider that the demand contains any misdescription of the debt or the creditor. In any event, IGE did not seek to set aside the demand under s 459J(1)(a) of the Corporations Act on the basis that it was defective by reason of a misdescription of any matter.
For those reasons, I make the following orders:
1. Proceedings dismissed.
2. Order the plaintiff to pay the defendant's costs of the proceedings in an amount agreed or assessed.
[3]
Endnote
Affidavit of Stuart Clark sworn of 4 December 2020, paragraphs [11]-[16] and pages 201-209 of Exhibit SC-1
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Decision last updated: 10 March 2021