In the matter of DCA Capital Pty Ltd; In the matter of Digital Commodity Assets Pty Ltd

There are two proceedings before me, being proceedings 2024/18318 filed on 16 January 2024 to wind up DCA Capital Pty Ltd in insolvency (DCA Capital proceedings) and proceedings 2024/18320 also filed on 16 January 2024 to wind up Digital Commodity Assets Pty Ltd in insolvency (Digital Commodity Assets proceedings).

In each of the DCA Capital proceedings and the Digital Commodity Assets proceedings, applications have now been made under s 1337H of the Corporations Act 2001 (Cth) to transfer them to the Federal Court of Australia. Those applications have been brought by Scott David Harry Langdon, Jennifer Anne Nettleton and John Mouawad, in their capacity as joint and several provisional liquidators of DCA Capital and Digital Commodity Assets (Provisional Liquidators).

The DCA Capital proceedings were commenced by Gabrielle Kennard. The Digital Commodity Assets proceedings were commenced by Shraddah Pty Ltd.

On 4 April 2024 the Federal Court of Australia proceedings NSD368 of 2024 (Federal Court proceedings) were commenced by each of Peter Brennan, Melody-Ann Hasse, Marcelle Bernard, PBG Pty Ltd and Broadview Investments Pty Ltd (Federal Court plaintiffs) seeking to wind up each of DCA Capital and Digital Commodity Assets in insolvency or on the just and equitable ground.

The Federal Court plaintiffs are investors in the Digital Commodity Assets Fund. The Fund was established to enable investment in digital assets (principally cryptocurrencies). Either or both of DCA Capital and Digital Commodity Assets are or have been the trustees of the Fund.

On 4 April 2024 ex parte orders were made by Halley J in the Federal Court proceedings pursuant to s 1323(3) of the Corporations Act 2001 appointing the Provisional Liquidators as receivers and managers of the property of DCA Capital, Digital Commodity Assets and the Fund.

On 5 April 2024 an administrator (Sule Arnautovic) was appointed to each of DCA Capital and Digital Commodity Assets pursuant to s 436A of the Corporations Act.

On 10 April 2024 orders were made by Markovic J pursuant to s 472(2) of the Corporations Act appointing the Provisional Liquidators as provisional liquidators to each of DCA Capital and Digital Commodity Assets, and requiring the Provisional Liquidators to submit a report to the Federal Court of Australia within 28 days of their appointment.

Also on 10 April 2024, the following ex parte orders were made by Markovic J in the Federal Court proceedings on the application of the Provisional Liquidators:

On 11 April 2024 the administrator gave notice that he had retired as administrator of DCA Capital and Digital Commodity Assets following the appointment of the Provisional Liquidators.

Also on 11 April 2024 Mr Balanian delivered his United States passport to the Federal Court of Australia.

The examinations of Mr Balanian and Mr Ellison have been listed before a Registrar of the Federal Court of Australia for two days on 1 and 2 May 2024 and the Provisional Liquidators have applied for various orders for production of documents in support of those examinations.

On 15 April 2024 the DCA Capital proceedings and the Digital Commodity Assets proceedings came before me for the hearing of applications under s 465B of the Corporations Act to substitute creditors in each of those proceedings. I made orders substituting Pubdin Pty Ltd as creditor in the DCA Capital proceedings and substituting Corpsand Pty Ltd as trustee for the Impulse Trust as creditor in the Digital Commodity Assets proceedings. Both Pubdin and Corpsand are investors in the Fund.

Also on 15 April 2024 I made orders in each of the DCA Capital proceedings and the Digital Commodity Assets proceedings adding the Provisional Liquidators and the Federal Court plaintiffs as defendants. Each of Pubdin and Corpsand then sought to proceed with applications to wind up DCA Capital and Digital Commodity Assets. On the application of the Provisional Liquidators, I adjourned the hearing of those winding up applications until 17 April 2024 and required any party who wished to make any application to do so by 4pm on 16 April 2024.

As mentioned above, the Provisional Liquidators have now applied under s 1337H of the Corporations Act to transfer the DCA Capital proceedings and the Digital Commodity Assets proceedings to the Federal Court of Australia. Those applications are neither opposed nor consented to by each of Pubdin and Corpsand.

Mr Notley appeared for the Provisional Liquidators, instructed by ERA Legal. Mr Somerville appeared for Pubdin and Corpsand, instructed by Bridges Lawyers.

Section 1337H of the Corporations Act relevantly provides:

None of ss 1337H(3)–(5) have any relevance to the present application.

Section 1337L of the Corporations Act identifies particular further matters to which I must give consideration in determining an application under s 1337H, providing that:

Section 1337L(a) and (b) have no relevance to the present application. As to s 1337L(c), by virtue of s 1337B(1) of the Corporations Act the Federal Court of Australia has jurisdiction with respect to civil matters arising under the Corporations legislation.

Further, s 1337G of the Corporations Act relevantly provides that:

The authorities on the application of s 1337H are uncontroversial. In Re Sumo Australia Ltd [2020] NSWSC 1142; (2020) 147 ACSR 561, Black J summarised them at [28]–[29] as follows:

The principles were also recently summarised by Anderson J in Vanis Capital Investments Pty Ltd (as trustee of the Vanis Capital Investment Trust) v Morris [2023] FCA 359 at [29] as follows:

This is an architype case in which this court should act in aid of the Federal Court of Australia in exercise of its jurisdiction in a civil matter under the Corporations Act, a national scheme of legislation in which the courts of the Commonwealth should cooperate with each other and ensure that there is harmony of operation.

There have been considerable serious steps already taken in the Federal Court proceedings concerning the control of the affairs of DCA Capital and Digital Commodity Assets by way of the appointment of the Provisional Liquidators as receivers and managers and also as provisional liquidators. In addition, public examinations of the directors of DCA Capital and Digital Commodity Assets have already been fixed to occur within the very near future and shortly there will be orders sought for the production of documents.

Further, the Federal Court plaintiffs are now also parties to the DCA Capital proceedings and the Digital Commodity Assets proceedings. Any rights of those parties can be conveniently exercised in the DCA Capital proceedings and the Digital Commodity Assets proceedings upon the transfer of them to the Federal Court of Australia.

Similarly, whatever rights Pubdin and Corpsand wish to exercise in the various proceedings can be done within the one court if they are transferred to the Federal Court of Australia.

In my view, requiring the parties to appear in two different jurisdictions to pursue precisely the same primary outcome, being the winding up of each of DCA Capital and Digital Commodity Assets, is both a waste of time and costs for all parties.

Submissions were made to me by both sides in agreement about the applicable “relation-back day”. Because a voluntary administrator was appointed to DCA Capital and Digital Commodity Assets on 5 April 2024 pursuant to section 436A of the Corporations Act, and the Provisional Liquidators were appointed by the Federal Court on 10 April 2024, if winding up orders are made in the future it would appear that the “relation back day” will be the day on which the administration began, being 5 April 2024 (by reason of item 23 of s 91 and ss 513A and 513C of the Corporations Act). If the Provisional Liquidators had not been appointed and winding up orders had instead been made in the DCA Capital proceedings and the Digital Commodity Assets proceedings, then the “relation-back day” would appear to be the date on which each application to commence the DCA Capital proceedings and the Digital Commodity Assets proceedings was filed, being 16 January 2024 (item 2 of s 91 of the Corporations Act).

The issue of the “relation-back day” is complicated. It will have to be dealt with at some future time, when the applications to wind up DCA Capital and Digital Commodity Assets are heard and determined. At the present time there is no “relation-back day” which has been fixed because no winding up orders have been made. It is, however, a neutral factor in whether there should be a transfer of the DCA Capital proceedings and the Digital Commodity Assets proceedings to the Federal Court of Australia. But clearly, if there is to be any application in relation to matters which might have an effect on the “relation-back day” and arguments made in respect of them, they should occur in the one jurisdiction.

Submissions were made to me by the Provisional Liquidators that the appointment of liquidators to DCA Capital and Digital Commodity Assets in this court may undermine the basis on which the asset preservation orders were made in the Federal Court proceedings and may cause a discharge of those orders to the detriment of the creditors of DCA Capital and Digital Commodity Assets. I express no view on that issue. It is, however, another issue which will have to be confronted at some stage and any party who wishes to make submissions in respect of it should have the opportunity to do so. But it is preferable to have that debate in the one forum. To my mind that is more appropriately the Federal Court of Australia in the present case because it is already considerably seized of the matters concerning DCA Capital and Digital Commodity Assets.

In my view, taking all of the relevant factors into account, it is entirely in the interests of justice that all matters concerning the common issues of the prospective winding up of each of DCA Capital and Digital Commodity Assets should be resolved in the Federal Court of Australia.

I make the following orders: