(b) Genuine dispute?
27 The relevant principles guiding the exercise of the Court's powers under ss 459H and 459J of the Act to set aside a demand on the basis of the existence of a genuine dispute about the existence of the debts to which the demands relate are set out above. Having regard to those principles and the circumstances here I am not satisfied that there is such a genuine dispute.
28 As noted above, the plaintiff's case rests on the following two core propositions:
(a) it is not personally liable under the Subscription Agreements because it executed those Agreements in its capacity as the responsible entity of the Fund; and
(b) it is not personally liable under the Subscription Agreements because of the terms of cl 19.1 of the Constitution.
29 In my view, both propositions are untenable.
30 As to the first, a trustee such as the plaintiff is personally liable for any debts it incurs in acting in its capacity as the responsible entity for the Fund. As Gummow J stated in Elders Trustee & Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 at 253:
It is fundamental that the common law does not recognise a trustee as having assumed an additional or qualified legal personality. This means that the liability of the trustee for debts he incurs includes those incurred in the course of performance of the trust. His liability to creditors is not limited or quantified by reference to the extent of the trust assets. The debts are his debts. However, the law does permit a trustee to contract with third parties on the basis that his personal liability is limited, for example, to the extent of his right to resort to and apply trust funds for the discharge of liabilities incurred by him in the authorised conduct of the trust. Nevertheless, third parties may in a given case, not be prepared to deal with a trustee on such a basis and, in any event, clear words are necessary to achieve a result whereby what is prima facie the unlimited personal liability of a trustee is so qualified.
(Emphasis added, citations omitted.)
31 And in the specific context of the winding up of a managed investment scheme as opposed to the winding up of the responsible entity, White J made the following observations in Stacks Managed Investments Ltd at [44]:
Winding up a trust is quite a different thing from winding up a company. Because the scheme, where it is a trust, is not a legal entity, the expression "scheme creditors" is at best a shorthand expression for those creditors of the responsible entity in respect of whose debts the responsible entity is entitled to be indemnified out of the scheme assets. There can be no question of settling an order of priority of "scheme creditors", or of precluding "scheme creditors" from taking or continuing proceedings for the recovery of their debts, or requiring them to submit to a process of lodgement of proof of debts with consequent appeals to the court from a decision on the acceptance or rejection of proofs. Unless the responsible entity were itself being wound up, creditors could not be precluded from enforcing the personal liability of the responsible entity in accordance with the ordinary processes of the court.
(Emphasis added, citations omitted.)
32 The defendants' submission, that, in the light of these authorities (as well as Astram Financial Services Pty Ltd at [364] per Buchanan J), unless and until PPI is itself wound up, the defendants cannot be precluded from enforcing the personal liability of PPI under the Subscription Agreements, should be accepted.
33 The plaintiff's second proposition is also untenable. Even if it is assumed (and without deciding) that cl 19 of the Constitution forms part of the bargain between the plaintiff and the defendants, it has no application to exclude PPI's contractual liability to repay monies advanced by the defendants. That is because that provision has no application to a claim to recover a debt which is due for payment. Such a claim is not a claim for breach of contract, nor is it a claim for a loss. As Barrett J pointed out in Castlepines at [8], there is a fundamental distinction between damages (or loss) and a debt:
Running through these provisions is the theme that there is a distinction between, on the one hand, "damages" and, on the other, "debt" and "other money". The distinction between damages and debt is, of course, fundamental. As is pointed out by Professors Carter and Harland (in J W Carter and D J Harland, "Contract Law in Australia", 4th edition, 2002, at page 875), the action to recover a debt due for payment has a longer history than the action to recover damages for breach of contract and, despite the concurrent administration of law and equity, it remains the case that an action to recover a contract debt due is not a claim for breach of contract. A person who points to a contract as the source of an unsatisfied right to be paid asserts a claim different in nature from that of a person who, relying upon a breach of contract, seeks compensatory relief in the form of monetary damages.
34 The exclusion of liability under cl 19.1 is not confined to liability in contract etc for any loss and extends to any act of the responsible entity (or its officers). It is clear, however, from the cap on liability imposed by cl 19.2(2) that cl 19.1 does not totally exclude liability in respect of contracts entered into by the responsible entity as trustee of the Fund, which would include these Subscription Agreements. Acceptance of the plaintiff's argument would render cl 19.2(2) otiose.
35 Moreover, and upon the same assumption as that upon which [33] above is based, even if it be the case that the Constitution is incorporated into each Subscription Agreement, cl 4 of the latter expressly states that, if there be any inconsistency between the provisions of the two documents, the Subscription Agreement prevails. Acceptance of the plaintiff's argument would produce an inconsistency between PPI's obligation to repay the face value of the notes within a specified time and the exclusion of liability under cl 19 of the Constitution, which inconsistency would have to be resolved by giving primacy to the obligation under the Subscription Agreements.
36 Having regard to these matters, the Court is not satisfied that there is a genuine dispute. It is not a case of balancing competing arguments on the relevant issues of construction and principle, rather the plaintiff's contentions are so weak that no genuine dispute exists.