In the matter of Digital Commodity Assets Pty Ltd

[2024] NSWSC 462

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Digital Commodity Assets Pty Ltd [2024] NSWSC 462

Hearing dates:

15 April 2024

Date of orders:

15 April 2024

Decision date:

15 April 2024

Jurisdiction:

Equity - Corporations List

Before:

McGrath J

Decision:

Order that the applicant be substituted as the applicant in the proceedings for the winding up of the company.

Catchwords:

CORPORATIONS — winding up — substitution of applicant for company to be wound up — where substitute applicant might otherwise have applied for an order winding up the company

Legislation Cited:

Corporations Act 2001 (Cth)

Cases Cited:

Re C2C Investments Pty Ltd (2012) 92 ACSR 266; [2012] NSWSC 1443

Re DCA Capital Pty Ltd [2024] NSWSC 427

Category:

Principal judgment

Parties:

Corpsand Pty Ltd in its capacity as trustee of the Impulse Trust (Applicant)
Digital Commodity Assets Pty Ltd (Defendant)

Representation:

Counsel:
H Somerville (Applicant)
No appearance (Defendant)

Solicitors:
Bridges Lawyers (Applicant)
No appearance (Defendant)

File Number(s):

2024/0018320

Publication restriction:

Nil

JUDGMENT— EX TEMPORE (REVISED 24 APRIL 2024)

INTRODUCTION

1. These proceedings were commenced by the plaintiff, Shraddah Pty Ltd, by way of an originating process which was filed on 16 January 2024. In that originating process, the plaintiff sought an order, amongst others, pursuant to s 459P of the Corporations Act 2001 (Cth) that the defendant, Digital Commodity Assets Pty Ltd, be wound up pursuant to s 459A of the Corporations Act.

2. I now have before me an interlocutory application which was filed on 28 March 2024 by the applicant, Corpsand Pty Ltd in its capacity as trustee of the Impulse Trust, seeking an order under s 465B of the Corporations Act that it be substituted as the applicant in these proceedings in place of Shraddah.

EVIDENCE

3. Corpsand relies on the affidavit of Larry Michael Bloch sworn 28 March 2024, which sets out the relevant facts pursuant to which Corpsand seeks to be substituted for Shraddah.

4. Mr Somerville, instructed by Bridges Lawyers, appears on behalf of Corpsand.

5. There was no appearance on behalf of Digital Commodity Assets.

LEGAL PRINCIPLES

6. The application is made under s 465B of the Corporations Act. That section provides:

(1) The Court may by order substitute, as applicant or applicants in an application under section 459P, 462 or 464 for a company to be wound up, a person or persons who might otherwise have so applied for the company to be wound up.

(2)   The Court may only make an order if the Court thinks it appropriate to do so:

(a)   because the application is not being proceeded with diligently enough; or

(b)   for some other reason.

(3)   The substituted applicant may be, or the substituted applicants may be or include, the person who was the applicant, or any of the persons who were the applicants, before the substitution.

(4)   After an order is made, the application may proceed as if the substituted applicant or applicants had been the original applicant or applicants.

7. The principles pursuant to which a substitution application brought under s 465B of the Corporations Act is to be dealt with are conveniently summarised in Re C2C Investments Pty Ltd (2012) 92 ACSR 266; [2012] NSWSC 1443 by Black J, particularly at [11]–[23].

8. The first matter of which I am required to be satisfied is that there has been an application under section 459P, 462 or 464 of the Corporations Act for Digital Commodity Assets to be wound up. As I have already indicated, such an application was made pursuant to s 459P by Shraddah.

9. As a second matter, I am also required to be satisfied that it is appropriate for the substitution to be made, either because the application has not been proceeded with diligently enough or for some other reason. In this case, the “for some other reason” ground is the relevant one to which I must direct my attention.

10. To enable an order for substitution to be made, it is not necessary for Corpsand to prove that it has served a statutory demand or to establish any of the grounds stated in s 461 of the Corporations Act to demonstrate that it might otherwise have applied for a winding up order. All that it is necessary for me to be satisfied of is that Corpsand is a person who might otherwise have applied for Digital Commodity Assets to be wound up.

11. On the facts before me, it is not necessary for me to deal with any aspect of the alleged debt owing to Corpsand as being the subject of a bona fide dispute upon substantial grounds, because there is no party before me making that submission.

RELEVANT FACTS

12. It appears that Digital Commodity Assets is, or was, the trustee of the Digital Commodity Assets Fund (Fund). Accompanying the establishment of the Fund was an information memorandum dated February 2019 (IM), which was issued by Digital Commodity Assets. Pursuant to the IM, it was stated that Digital Commodity Assets was to be the trustee of the Fund, and that the trustee was to issue units in the Fund.

13. Corpsand first invested in the Fund on 5 March 2020 when it completed and lodged the relevant application form contained in the IM. That first investment was in the amount of $2,000,000, in exchange for which Corpsand was issued with units in the Fund. Further investments on 9 March 2020, 28 September 2020 and 31 March 2022, and the issuance of additional units in the Fund to Corpsand in kind, followed.

14. As at 28 February 2023, Corpsand had received a statement indicating that the value of its units held in the Fund was in excess of $1.3 million.

15. On 17 July 2023, Corpsand lodged a redemption request form, by which it sought to redeem all of its units held in the Fund. It did so in accordance with the IM which governed the Fund, the terms of which provided that Digital Commodity Assets was required to redeem those units within 21 days of the lodgement of the redemption request form.

16. On the material before me, it appears that Corpsand has received no sum of money to date in satisfaction of the liability to redeem Corpsand’s units in the Fund pursuant to the redemption request lodged on 17 July 2023 from either Digital Commodity Assets or DCA Capital Pty Ltd (the latter of which, it seems, replaced Digital Commodity Assets in its role as trustee of the Fund in or around May 2023: see Re DCA Capital Pty Ltd [2024] NSWSC 427 at [14]).

17. On 26 October 2023, Corpsand issued a creditor’s statutory demand to DCA Capital for payment in respect of the outstanding debt of $1,342,554.95.

18. On 23 November 2023, the director of DCA Capital (who is also the director of Digital Commodity Assets), via the solicitors for DCA Capital, wrote to the solicitors for Corpsand asserting that DCA Capital was not liable for the debt and that Digital Commodity Assets was liable for breach of contract.

CONSIDERATION

19. I am satisfied that Digital Commodity Assets remains indebted to Corpsand for the amount of the outstanding debt of $1,342,554.95 and that Corpsand, as at 16 January 2024 (being the date on which Shraddah filed the originating process seeking an order winding up Digital Commodity Assets), had also served a statutory demand in respect of that debt, which has now expired.

20. Accordingly, for the purposes of s 465B of the Corporations Act, I consider that Corpsand might otherwise have applied to wind up Digital Commodity Assets.

ORDERS

21. Accordingly, in the circumstances, I make an order pursuant to s 465B of the Corporations Act that Corpsand be substituted in place of Shraddah as applicant in the application seeking that the defendant, Digital Commodity Assets, be wound up.

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Decision last updated: 24 April 2024