In the matter of DCA Capital Pty Ltd ACN 629 833 129

This application is brought by the plaintiff, DCA Capital Pty Ltd ACN 629 833 129, under Part 5.4 of the Corporations Act 2001 (Cth) by originating process filed 27 November 2023, seeking an order pursuant to s 459G(1) of the Corporations Act setting aside the statutory demand dated 6 November 2023 issued by the defendant, Archener Pty Ltd ACN 081 353 988 ATF O’Keefe Family Trust, to DCA Capital.

The statutory demand is for payment of an alleged debt in the amount of $996,407.30. That alleged debt is said to represent the amount payable by DCA Capital to Archener for the redemption of units held by Archener in the Digital Commodity Assets Fund (DCA Fund), a unit trust of which DCA Capital was the trustee.

In these proceedings, DCA Capital relies solely on s 459H(1)(a) of the Corporations Act, seeking to demonstrate that there is a genuine dispute between DCA Capital and Archener as to the existence and the amount of the debt to which the statutory demand relates.

In support of its application, DCA Capital relies on the following evidence:

In resisting the application, Archener relies on the affidavit of Sonia O’Keeffe sworn 22 January 2024 and the exhibit to that affidavit.

At the hearing before me, Ms B Arste appeared for DCA Capital, instructed by Kerrs. Mr H Somerville appeared for Archener, instructed by Bridges Lawyers.

On 2 May 2018, the DCA Fund was established by the Constitution. The DCA Fund was set up as a wholesale Australian unit trust to trade in digital commodities, with Digital Commodity Assets Pty Ltd (DCA) designated as the Responsible Entity and trustee. The relevant terms of the Constitution are considered in more detail below.

On 5 November 2018, DCA Capital was incorporated.

At some point after 5 November 2018 and before August 2021, DCA Capital became the trustee of the DCA Fund in place of DCA, but the evidence did not reveal when and how that occurred. There was no issue between the parties as to DCA Capital being the trustee of the DCA Fund.

In March 2021, DCA Capital issued an Information Memorandum to potential investors in the DCA Fund (March 2021 IM). The relevant terms of the March 2021 IM are considered in more detail below. The admissibility of the March 2021 IM as evidence on the application was challenged by Archener.

At an unspecified date, the March 2021 IM was issued to Archener.

On 19 August 2021, Sonia O’Keeffe and Patrick O’Keeffe, as directors of Archener, signed the Application Form to invest in the DCA Fund and lodged it with DCA Capital. The Application Form refers to DCA Capital in its capacity as trustee of the DCA Fund and to the March 2021 IM, and indicates that Archener applied to invest $455,000 in the DCA Fund.

The Application Form states that it accompanies the March 2021 IM issued by DCA Capital in its capacity as trustee of the DCA Fund. It contains numerous details about Archener, including the identification of the ANZ bank account in the name of Archener into which the “credit of withdrawals and credit of distributions” were to be made. It also contains the following statements:

On 23 August 2021, Archener transferred $415,000 into the bank account nominated by DCA Fund in the Application Form.

On 24 August 2021, Archener transferred a further $40,000 into that same account.

On 24 August 2021 at 4:09pm, DCA Fund sent an email to Sonia O’Keeffe acknowledging the receipt of the total amount of $455,000 from Archener as its investment in the DCA Fund and acknowledging the request made by Archener for split monthly reporting of the Archener investment in the DCA Fund into three separate accounts: Archener ATF O’Keeffe Family Trust 1 ($400,000), Archener ATF O’Keeffe Family Trust 2 ($15,000) and Archener ATF O’Keeffe Family Trust 3 ($40,000).

On 24 November 2021, DCA Capital sent a subscription confirmation to Archener stating that it had been issued with 127,623.413 units in the DCA Fund at an offer price of $3.45929081, being a net subscription amount of $441,486.50 after the deduction of an account set up fee of $13,513.50.

On 20 June 2022, Sonia O’Keeffe and Patrick O’Keeffe, as directors of Archener, signed two Additional Investment Forms to invest further amounts of $300,000 and $15,000 in the DCA Fund and lodged those forms with DCA Capital.

On 20 June 2022, Archener transferred $329,000 into the same bank account that had been nominated by DCA Fund in the Application Form.

On 21 June 2022 at 12:28pm, DCA Fund sent an email to Sonia O’Keeffe acknowledging the receipt of the total amount of $329,000 from Archener as its additional investment in the DCA Fund.

On 8 November 2022, the DCA Fund issued three transaction reports in relation to the investment of Archener in the DCA Fund as at 30 September 2022, which evidenced that Archener ATF O’Keeffe Family Trust 1 had a balance of $842,258.14, Archener ATF O’Keeffe Family Trust 2 had a balance of $67,802.47, and Archener ATF O’Keeffe Family Trust 3 had a balance of $35,433.90, totalling $945,494.51.

On 21 March 2023, Sonia O’Keeffe and Patrick O’Keeffe, as directors of Archener, completed three Redemption Request Forms asking for a full withdrawal of funds from the DCA Fund, with the payment of the redemption proceeds to be made into a nominated bank account of Archener.

On 21 March 2023 at 2:14pm, Sonia O’Keeffe sent an email to the DCA Fund attaching the completed Redemption Request Forms for each of the O’Keeffe Family Trusts 1, 2 and 3 accounts.

On 27 March 2023, each of the Redemption Request Forms was sent via registered mail to DCA Capital.

On 6 November 2023, the statutory demand and accompanying affidavit of Sonia O’Keeffe sworn 6 November 2023 were served on DCA Capital under a covering letter from the solicitors for Archener, Bridges Lawyers. The statutory demand sought payment of the debt described (leaving grammatical errors in place) as “[a]mount due and payable by the Company [DCA Capital] to the Creditor [Archener] being the redemption price payable by the Company [DCA Capital] pursuant to clause 4.2 of the Digital Commodity Assets Fund Information Memorandum dated May 2021 following the giving a redemption requests by the Creditor on 23 March 2023” with the “amount of the debt (incl. GST)” stated to be $996,407.30.

On 27 November 2023, the solicitors for DCA Capital, Kerrs, sent a letter to Bridges Lawyers asserting that the statutory demand was capable of being set aside on the ground that there was a defect in the demand due to the failure of the affidavit of Sonia O’Keeffe to evidence the trust relationship between Archener and the O’Keeffe Family Trust, and that there was a genuine dispute as to the validity of the debt on the basis that the statutory demand was issued against the incorrect entity. The letter invited the immediate withdrawal of the statutory demand by Archener and an undertaking from it not to take any further action on the statutory demand.

On 27 November 2023, DCA Capital filed the originating process applying to set aside the statutory demand.

The following are relevant parts of the Constitution:

Relevant extracts of the March 2021 IM are as follows (footnotes omitted):

At the hearing, Archener advanced a jurisdictional argument at the outset based on the so-called Graywinter principle, to the effect that the court has no jurisdiction to entertain the application to set aside the statutory demand made by DCA Capital in circumstances where the Balanian affidavit in support of the application failed to identify expressly or by necessary implication the grounds upon which that application was being made.

The Graywinter principle also formed the basis upon which Archener sought to exclude or limit the use of two central documents tendered as evidence by DCA Capital in the proceedings, being the Constitution and the March 2021 IM (the latter of which formed part of the exhibit to the Balanian affidavit).

The Graywinter principle has its origins in Sandberg J’s observations in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; (1996) 21 ACSR 581 concerning the requirements under the statutory regime established by s 459G of the Corporations Act.

Section 459G of the Corporations Act provides:

In Re ABA Villawood Place Pty Ltd [2023] NSWSC 952, Black J at [31] stated that the essential requirement of s 459G that the Graywinter principle emphasises is:

The authorities concerning the Graywinter principle (which I will outline and discuss in greater depth below) indicate that the threshold requirement is:

The argument at the hearing canvassed relevant authorities, including at appellate level, addressing the scope and operation of the Graywinter principle. The principal authorities are addressed below.

In NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd (2010) 79 ACSR 544; [2010] NSWCA 210 (a decision to which I was referred by DCA Capital), the Court of Appeal of this court considered whether an affidavit in support of an application under s 459G in fact supported that application, in circumstances where the affidavit was directed to an offsetting claim but did serve to put in evidence the document (a facility agreement) upon which the debtor company ultimately wished to advance a particular construction, this being at the heart of the alleged dispute. After listing the many cases that had discussed the Graywinter principle (at [77]), Lindgren AJA (with whom Beazley JA and Handley AJA agreed) at [85] stated:

In Hopetoun Kembla Investment Pty Ltd v JPR Legal Pty Ltd (2011) 87 ACSR 1; [2011] NSWSC 1343, Ward J (as her Honour the President then was) at [35]–[36] and [38] said:

Sceam Construction Pty Ltd v Clyne (2021) 64 VR 404; [2021] VSCA 270 is a decision of the Victorian Court of Appeal constituted by Ferguson CJ, Sifris and Walker JJA. The facts in Sceam Construction involved a statutory demand issued to a construction company (Sceam) that had been engaged to carry out renovations at the defendants’ home. That demand was issued after the renovation project collapsed. Sceam applied to the court, within time, to set the demand aside. The application was accompanied by an affidavit in support to which several documents were exhibited, including sections of the works contract between Sceam and the defendants. On appeal, the primary issue was whether the supporting affidavit was sufficient to support the application to set aside the statutory demand on the basis that there was a genuine dispute.

This was in circumstances where the alleged dispute, as disclosed by the affidavit filed with the application, centred on “defective design of the structure” by the architect (which the deponent pointed to as the reason for various problems encountered throughout construction). At the hearing at first instance, the dispute was otherwise characterised, said by Sceam to concern the validity of the contract’s termination.

In their joint judgment, Ferguson CJ, Sifris and Walker JJA said at [38]:

At [49], their Honours noted:

At [89], their Honours went on to say:

The court, finding that the affidavit and exhibited correspondence did little more than “repeat the language of the statute by saying that there was a dispute about [defects and incomplete works] and that that dispute was genuine” (at [91]), held that the affidavit was insufficient in that vital respect (at [88]).

In ABA Villawood Place, Black J referred to Hopetoun and Sceam with approval, stating at [31]:

At the hearing, Archener sought to draw an analogy between the facts in Sceam and those at play in the present application. In connection with Archener’s objection to the admission into evidence of the Constitution and the March 2021 IM, Archener highlighted that in Sceam Construction (as here), “some, but not all” parts of the documents governing the relationship between Sceam and defendants formed part of the material placed before the court (T12). In Sceam, the Victorian Court of Appeal found that what was included was not enough to support the application to set aside the statutory demand — the material neither demonstrated, nor provided a foundation for inferring, the existence of a dispute about the termination of the contract. For reasons that I have set out below, the same cannot be said of the Balanian affidavit and the material furnished by DCA Capital in this case. In my assessment, the analogy does not assist.

It was submitted by Archener that the Balanian affidavit makes no express reference to the operation of the Constitution and the March 2021 IM as the grounds upon which the debt is contested, and therefore in no way suggests that the basis of the alleged dispute concerns the nature of the rights held by Archener as a unitholder.

In Archener’s submission, the contents of the Balanian affidavit and documents annexed to it all point to the identity of the trustee and/or the change in trustee of the DCA Fund as the ground for disputing the debt and are incapable of supporting a necessary or reasonable inference that the ground pressed by DCA Capital related to the rights and obligations of each of DCA Capital and Archener pursuant to the Constitution and March 2021 IM. In these circumstances, Archener asserts, the Graywinter principle is activated, and the court has no jurisdiction to consider the Constitution (it having been provided to Archener outside of the statutory 21-day period). Following a similar logic, a limiting order pursuant to s 136 of the Evidence Act 1995 (NSW) was sought in respect of the March 2021 IM, to limit its use to the purposes for which, on the face of the Balanian affidavit, it seemed originally to have been produced; that is, to buttress the change in trustee argument.

But on my assessment, having regard to the application of the principles contained in NA Investments, Hopetoun and Sceam (as approved in ABA Villawood Place), Archener must fail on the jurisdictional point.

I am satisfied that the Balanian affidavit contains material that by necessary or reasonably available inference did indicate that DCA Capital was challenging the statutory demand on the basis of the characterisation of Archener’s rights as a holder of units in the DCA Fund for the following reasons:

In my assessment, neither the March 2021 IM nor the Application Form are capable of being read without reference to the terms of the Constitution. That being so, and in circumstances where both Balanian affidavit and the material exhibited to it (all filed within the 21-day statutory period) expressly refer to and comprise the documents governing the relationship between the parties, the Graywinter principle does not apply so as to preclude the admission into evidence, or my consideration of, the March 2021 IM, the Application Form and the Constitution in this application.

Section 459H(1) of the Corporations Act is in the following terms:

In the recent decision of Re JDH Capital Pty Ltd [2024] NSWSC 164, Black J at [13]–[16] conveniently summarised the relevant principles governing the determination of an application to set aside a creditor’s statutory demand under s 459H(1)(a) of the Corporations Act:

The approach of the court to such an application, and especially to the issue of whether the dispute is genuine, was further elucidated in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330, where the Victorian Court of Appeal (comprising Kyrou, Ferguson and Kaye JJA) at [47]–[50] stated (citations omitted):

DCA Capital submits that there is a genuine dispute as to both the existence of the debt and the amount of the debt.

As to the existence of the debt, DCA Capital’s argument is as follows:

DCA Capital also submits that there is a genuine dispute about the amount of the debt, which is claimed by Archener to be $996,407.30 (including GST). DCA Capital says that section 4.2 of the March 2021 IM explains the mechanics of redeeming units in the DCA Fund and outlines a formula for the calculation of the redemption price for a unit in the DCA Fund which depends on:

According to DCA Capital, the amount of the debt in dispute is simply not known because:

DCA Capital says that there are cases in which courts have found that entry of amounts in the accounts of a trust, as due to a beneficiary, in the particular circumstances, amounted to an admission that the amount was due and payable, referring to In the matter of Norwest Legal Services Pty Ltd [2019] NSWSC 1896, Black J at [10], citing Chianti Pty Ltd v Leume Pty Ltd [2007] WASC 270 at [77] and Gustode Pty Ltd v Ashley [2011] FCA 250. DCA Capital says there is no analogous evidence before the court in this case that the amount of $996,407.30 as claimed in the statutory demand is, in fact, due and payable as an acknowledgement or an admission.

Archener’s submissions in response are succinct. DCA Capital has failed to meet its burden of proof and evidentiary onus to place before the court material which would demonstrate that there is a genuine dispute about the existence and the amount of the debt. Archener does not have an onus to adduce evidence to contradict itself. Archener’s statutory demand has been prepared based on information available to it which has not been challenged in an evidentiary way by DCA Capital.

Archener says that there is no genuine dispute in this case because Mr Balanian has given evidence that he has access to the books and records of DCA Capital and DCA Fund but has failed to put on evidence of such of them as are germane to the dispute, particularly for the calculation of the amount of the debt. All that DCA Capital has done on this application is raise hypothetical grounds for alleging the existence of a dispute which could never “have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion” in the sense described in Malec.

I agree with the submissions that have been made by Archener.

The rights which attach to a unit in a unit trust do not equate to those of a share in a company. In Charles v Federal Commissioner of Taxation (1954) 90 CLR 598, Dixon CJ, Kitto and Taylor JJ at 609 said (in a taxation context):

It is clear that the rights held by a unitholder who holds units in unit trust are to be determined by reference to the terms of the trust deed under which it is established, not in the abstract. In ElecNet (Aust) Pty Ltd v Federal Commissioner of Taxation (2016) 259 CLR 73; [2016] HCA 51, Kiefel, Gageler, Keane and Gordon JJ at [50] said (again in a taxation context; footnote omitted):

In this case, those rights are primarily governed by the Constitution. Clause 2.1 of the Constitution provides that each unitholder has a beneficial interest in the DCA Fund but not in any specific part or assets of DCA Fund. But that is not the end of the required analysis for the purposes of this application.

To determine the rights of Archener and how they should be characterised, it is also necessary to consider the provisions of the Constitution concerning withdrawals, as a result of Archener having submitted the Redemption Request Forms to DCA Capital in March 2023. Once that occurred, in accordance with cl 2.35 of the Constitution, it was incumbent on DCA Capital, within 21 days of the “Valuation Time” on which the unit price of the “Units” is (or was) determined in accordance with cl 2.36, to cause the redemption of Archener’s interest in the DCA Fund as equals the amount of the withdrawal.

For reasons which will become readily apparent from the operation of cl 2.36 of the Constitution, Archener would have no way of knowing that precise amount without being provided with information known only to DCA Capital.

This is because the determination of the unit price of a “Unit” of a “Class” requires the calculation of a range of integers under cl 2.36, most of which then reference numerous defined terms contained in cl 16.1 of the Constitution, being:

Yet, DCA Capital comes to court to say that it genuinely disputes the debt in the statutory demand without any of this detailed information from its own books and records, to which Mr Balanian of DCA Capital has direct access. DCA Capital provides no evidence of:

DCA Capital has the onus of proof and the evidentiary burden on this application to make out its case that there is a genuine dispute as to the existence or the amount of the debt. But it has not favoured me with the very evidence that goes to the very heart of those matters. It leaves me without any evidence of what has been done by DCA Capital on receipt of the Redemption Request Forms. Those matters are peculiarly within its knowledge, yet it says that Archener has failed to prove those matters. That is an erroneous reversal of the onus of proof in this application, which rests with DCA Capital.

To my mind, the failure of DCA Capital to do anything other than assert without evidence that there is a genuine dispute falls short of the requirements of s 459H(1) of the Corporations Act and the principles that have been developed relating to the application of that provision. In reaching this conclusion, I am conscious, from the guidance in Wollongong Coal (as approved in Ligon 158) that while the relevant test to be applied is not a difficult or demanding one, it should not be set so low as to defeat the legislative purpose of s 459H(1). It was not difficult or demanding for DCA Capital to provide the evidentiary support required to demonstrate the genuineness of any dispute, but it has not done so.

For the reasons stated above, I propose to make the following orders: