In the matter of Tradercobb Pty Ltd (in Liquidation)

1. [1]

   By Originating Process filed 6 August 2024, the First Plaintiff, Mr Timothy Cook in his capacity as liquidator (Liquidator) of the Second Plaintiff, Tradercobb Pty Ltd (in liq) (Tradercobb), seeks orders under s 60-10 of the Insolvency Practice Schedule (Corporations) (IPSC) for approval of his remuneration.

2. [2]

   In particular, approval is sought for remuneration in the amount of:

   1. (1)

      $6,517.50 (plus GST), for the period from 15 March 2023 to 27 March 2023 (during the voluntary administration of Tradercobb);

   2. (2)

      $79,935.50 (plus GST), for the period from 27 March 2023 to 30 April 2024;

   3. (3)

      $71,197.50 (plus GST), for the period from 1 May 2024 to 30 June 2024; and

   4. (4)

      $50,000.00 (plus GST), for the period from 1 July 2024 through to the conclusion of the liquidation.

Formal Matters

1. [3]

   The Liquidator's application did not comply with the requirements of r 9.2 of the Supreme Court (Corporations Rules) 1999 in two respects.

2. [4]

   First, the Liquidator did not provide notice of his intention to apply for the determination of his remuneration at least 21 days before filing the Originating Process, together with a copy of the supporting affidavit, as required by r 9.2(2). However, on 9 August 2024, the Liquidator issued a notice to creditors and shareholders of Tradercobb, attaching a copy of the Originating Process and supporting affidavit of the Liquidator filed on 6 August 2024. Accordingly, each of the creditors and shareholders was provided with a month's notice in advance of the hearing of this application. No creditor raised any issue regarding the quantum of the remuneration or indicated that they required further time to deal with that application. In those circumstances, I indicated I would dispense with compliance with the requirement under r 9.2(2).

3. [5]

   Secondly, the supporting affidavit did not include a summary of receipts taken and payments made by the Liquidator, as required by r 9.2(6)(d). However, this summary was tendered on the application, and I do not consider that any creditor was prejudiced by the failure to include it in the supporting affidavit. No creditor raised any issue about the absence of this material, or about the adequacy of the evidence provided in support of the application. In those circumstances, I indicated I would also dispense with compliance with this requirement.

Background

1. [6]

   Tradercobb was incorporated on 20 December 2017 and initially had two directors, Mr Pino Tedesco and Mr Craig Cobb. Mr Tedesco resigned on 8 February 2023 and Mr Cobb remains a director.

2. [7]

   Tradercobb operated a business educating on the trading of cryptocurrency as well as undertaking its own trading on an exchange platform known as FTX. Commissions were earned at a rate of 40% of FTX's trading fees on trades executed by clients of Tradercobb.

3. [8]

   The primary asset of Tradercobb was cryptocurrency held in wallets throughout block chain networks.

4. [9]

   In November 2022, administrators were appointed to FTX Express Pty Ltd and FTX Australia Pty Ltd. At around the same time, administrators were also appointed to related FTX entities incorporated in the US and the Bahamas.

5. [10]

   Tradercobb was placed into voluntary administration on 20 February 2023, and into liquidation on 27 March 2023.

Relevant Principles

1. [11]

   Section 60-5 of the IPSC set out in Schedule 2 to the Corporations Act 2001 (Cth) (the Act) provides that an external administrator of a company is entitled to receive remuneration for necessary work properly performed by the external administrator in relation to the external administration, in accordance with the remuneration determinations (if any) for the external administrator.

2. [12]

   Section 60-10 of the IPSC provides that remuneration determinations may be made by, inter alia, the Court.

3. [13]

   Section 60-10(4) provides that, if a determination under this section specifies that the external administrator is entitled to receive remuneration worked out wholly or partly on a time-cost basis, the determination must include a cap on the amount of remuneration worked out on a time-cost basis that the external administrator is entitled to receive.

4. [14]

   In determining the amount of such remuneration, the Court must have regard to the matters specified in s 60-12, namely:

5. [15]

   Those matters overlap with the matters which have traditionally been taken into account in assessing an insolvency practitioner's remuneration, as summarised by Black J in Re Sakr Nominees Pty Limited [2017] NSWSC 668 at [23]-[25]:

6. [16]

   The Liquidator also referred to the recent summary of principles by Cheeseman J in Phoenix Institute of Australia Pty Ltd (in liq) [2021] FCA 1203 at [27]-[31]:

Past costs of Administration

1. [17]

   On 20 February 2023, the creditors approved remuneration of the administrator in an amount of $52,685 plus GST, with a further $25,000 approved through to the conclusion of the administration.

2. [18]

   As matters transpired, the administrator performed work, on a time costed basis, of $31,517.50 in respect of the period through to the end of the administration.

3. [19]

   The present application seeks the Court's approval for the amount of $6,517.50 for work done above the amount previously approved.

4. [20]

   The Liquidator has provided detailed time costing records for the work done in the course of the administration, with narratives. The Liquidator has also provided a summary of work done in various work streams by reference to individual staff members and their rates. In addition, the Liquidator has provided in his affidavit a description of the tasks undertaken in respect of the various work streams performed in the administration.

5. [21]

   The estimate previously given for the amount of work required through to the conclusion of the administration was exceeded largely as the result of additional work being required on creditor claims than had been anticipated, due in part to poor documentation.

6. [22]

   In his affidavit, the Liquidator addressed each of the factors in s 60-12 so far as concerns the work which was undertaken during the period of the administration. I have had regard to each of those factors, and the Liquidator’s evidence relating to each of those factors.

7. [23]

   I am satisfied on the basis of the Liquidator's evidence that the work undertaken was necessary and was properly performed. I am also satisfied that the work undertaken was complex, and from my review of the time records, have no reason to doubt that the work was undertaken by persons of appropriate seniority, and that the time taken to perform that work was appropriate.

Past costs of Liquidation

1. [24]

   The Liquidator sought an amount of $151,133 in respect of his remuneration for work done in the liquidation up to 30 June 2024 (comprising $79,935.50 in respect of the period from 27 March 2023 to 30 April 2024, and $71,197.50 in respect of the period from 1 May 2024 to 30 June 2024).

2. [25]

   Again, the Liquidator provided detailed time narratives in respect of the work done in this period; copies of the invoices issued in respect of that work; and a summary of the hours performed by reference to the various streams of work, the staff performing that work, and the seniority and rates of those staff.

3. [26]

   It should be noted that whereas the summary shows that, on a time-cost basis, work in an amount of around $176,132.50 was performed by the Liquidator and his staff, the amount of the claim was subsequently reduced by some $25,000 to the amount presently sought.

4. [27]

   In his statutory report, and in his affidavit, the Liquidator provided a detailed description of the work undertaken in each stream.

5. [28]

   Further, in his affidavit, the Liquidator addressed each of the factors in s 60-12 so far as concerns the work undertaken during the period of the liquidation of Tradercobb.

6. [29]

   The Liquidator identified a number of complicating factors impacting the liquidation of Tradercobb. These included:

   1. (1)

      Assessing cross border assets involving numerous international external administrators (that is, the FTX group assets);

   2. (2)

      Dealing with Mr Cobb and Mr Tedesco, in circumstances where their relationship had broken down;

   3. (3)

      Managing complex record-keeping systems;

   4. (4)

      Determining the viability of incomplete records held across various platforms;

   5. (5)

      Difficulties in ascertaining intellectual property assets which were subject to various impediments to sale;

   6. (6)

      Investigating and understanding Tradercobb's unconventional business approach, which involved an educational platform that transitioned into generating affiliate revenue through an investment platform; and

   7. (7)

      Seeking documents to assess employee and contractor claims, and superannuation claims raised by former contractors.

7. [30]

   I have considered each of the factors in s 60-12, and the Liquidator’s evidence addressing each of those factors. I am satisfied on the basis of the Liquidator's evidence that the work undertaken during the liquidation was necessary and was properly performed. I am also satisfied that the work undertaken was complex, and from my review of the time records, have no reason to doubt that the work was undertaken by persons of appropriate seniority, and that the time taken to perform that work was appropriate.

Future work

1. [31]

   Finally, the Liquidator sought an amount of $50,000 for future remuneration through to the conclusion of the liquidation of Tradercobb.

2. [32]

   The Liquidator identified the steps to be taken in order to complete the liquidation and bring about a return to creditors, and his estimate of the time required to perform those tasks. Again, having considered each of the factors in s 60-12 and the Liquidator’s evidence, I am satisfied on the basis of the Liquidator's evidence that this work is likely to be necessary and have no reason to doubt the Liquidator's estimates of the time required for this work and the resources required to complete this work.

Proportionality

1. [33]

   As the Liquidator acknowledged, and as set out in the authorities to which I have referred, one matter which is necessary to address is the issue of proportionality.

2. [34]

   If the Court approves remuneration in the amount sought by the Liquidator, the result will be, when account is taken of the remuneration previously approved in the administration, that the total remuneration would represent 77% of the amount recovered to date. (That depends on an assumption which, as noted below, I have not determined, that the realised assets represent property of the company.)

3. [35]

   The Liquidator acknowledged that this is a high percentage. However, the Liquidator has already completed the work required to realise further assets from the cross-border cryptocurrency platforms in the USA and Bahamas. If these further assets are realised in the amount estimated by the Liquidator (of around $313,000), then the percentage of remuneration will reduce to around 40%. Further, I accept that, on the evidence before me, it is appropriate for the Liquidator to have performed the work required to realise these further assets, given that any such realisation would materially increase the assets available for distribution.

4. [36]

   From the assets realised to date, it is expected that all unsecured creditors, including the Australian Taxation Office, will be paid in full.

5. [37]

   Finally, as previously noted, all creditors and shareholders of Tradercobb were provided with notice of this application, and the supporting evidence. None has appeared to oppose the remuneration sought and none has, in correspondence, raised any concern about, or criticism of, the amount sought.

6. [38]

   On the basis of the matters outlined above, and having regard to the Liquidator's evidence in support of the application, I am satisfied that it is appropriate to approve remuneration in the amount sought by the Liquidator.

Dispute regarding title to assets

1. [39]

   At the commencement of the hearing, Mr Winston appeared on behalf of the former director of Tradercobb, Mr Tedesco, who is also a creditor. Mr Tedesco did not oppose the relief sought by the Liquidator, but noted that he claims that certain moneys which the Liquidator includes in the assets realised in the liquidation represent Mr Tedesco's property, and are not available for payment of the Liquidator's remuneration. I refer to the property in question as the Disputed Funds.

2. [40]

   The Liquidator had, in his affidavit, stated an intention to pay his remuneration out of the realised assets (which include the Disputed Funds). Mr Tedesco was concerned to ensure that it was not subsequently suggested that there was an Anshun estoppel by reason of his failure to contest the question of title to the Disputed Funds in this proceeding.

3. [41]

   By the present application, the Liquidator seeks orders that his remuneration be fixed in a certain amount and that this remuneration be paid from the assets of Tradercobb. The Liquidator accepted that the determination of his application would not involve any determination regarding the identity or quantum of the assets of Tradercobb that are available for payment of that remuneration, and therefore would not involve any determination regarding entitlement to the Disputed Funds.

4. [42]

   In those circumstances, and to avoid any subsequent issue regarding whether or not there was an Anshun estoppel, Mr Tedesco sought, and the Liquidator did not oppose, a notation to the orders to the effect that the determination of the Liquidator's application does not determine any right or title to, or interest in, the assets referred to in paragraph 72 of the Liquidator's affidavit of 6 August 2024 (being the Disputed Funds). I was satisfied that such a notation should be made.

5. [43]

   For those reasons, I make the following orders:

   1. (1)

      Dispense with the requirement for compliance with rule 9.2(2) and 9.2(6)(d) of the Supreme Court (Corporations Rules) 1999

   2. (2)

      Order, pursuant to s 60-10 of the Insolvency Practice Schedule (Corporations) (IPS) to the Corporations Act 2001 (Cth), that the First Plaintiff is entitled to receive, for necessary work performed by him in relation to the admission of the Second Plaintiff for the period of 15 March 2023 to 27 March 2023, calculated on a time cost basis in accordance with the hourly rates of Balance Insolvency, as detailed in the First Plaintiff’s statutory report to creditors dated 6 June 2024, the amount of $6,517.50 (plus GST) from the assets of the Second Plaintiff.

   3. (3)

      Order, pursuant to s 60-10 of the IPS, that the First Plaintiff is entitled to receive, for necessary work performed by him in relation to the liquidation of the Second Plaintiff for the period of 27 March 2023 to 30 April 2024, calculated on a time costs basis in accordance with the hourly rates of Balance Insolvency, as detailed in the First Plaintiff’s statutory report to creditors dated 6 June 2024, the amount of $79,935.50 (plus GST) from the assets of the Second Plaintiff.

   4. (4)

      Order, pursuant to s 60-10 of the IPS, that the First Plaintiff is entitled to receive, for necessary work performed by him in relation to the liquidation of the Second Plaintiff for the period of 1 May 2024 to 30 June 2024, calculated on a time costs basis in accordance with the hourly rates of Balance Insolvency, as detailed in the First Plaintiff’s statutory report to creditors dated 6 June 2024, the amount of $71,197.50 (plus GST) from the assets of the Second Plaintiff.

   5. (5)

      Order, pursuant to s 60-10 of the IPS, that the First Plaintiff is entitled to receive, for necessary work performed by him in relation to the liquidation of the Second Plaintiff from 1 July 2024, calculated on a time costs basis in accordance with the hourly rates of Balance Insolvency, as detailed in the First Plaintiff’s statutory report to creditors dated 6 June 2024, the amount of $50,000.00 (plus GST) from the assets of the Second Plaintiff.

   6. (6)

      Order that the Plaintiffs’ costs of this Originating Process be payable, on an indemnity basis, from the assets of the Second Plaintiff.

   7. (7)

      Declare that the First Plaintiff is entitled to pay himself the amounts referred to in orders 2-6 herein from the assets of the Second Plaintiff.