Federal Court of Australia

Ayres, in the matter of Trigon Trading Pty Ltd (Administrators Appointed) [2023] FCA 28

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 439A (6) of the Corporations Act 2001 (Cth) (the Act), the period within which the plaintiffs must convene the second meeting of creditors in respect of Trigon Trading Proprietary Limited (Administrators Appointed) ACN 610 865 533 (the company) under s 439A of the Act (second meeting) be extended to 29  March 2023.

2.    Pursuant to s 477A(1) of the Act, part 5.3A of the Act is to operate in relation to the company such that, notwithstanding s 439A(2) of the Act, the second meeting may be held at any time during the period during, or within five business days after the end of the convening period as extended in order (1) above, notwithstanding the provisions of s 439A(2) of the Act.

3.    The plaintiffs, within seven days of making these orders, take all reasonable steps to give notice of the orders to the company’s creditors (including persons claiming to be creditors) by means of a circular:

(a)    to be sent by email transmission to creditors for whom the plaintiffs have current email addresses; or

(b)    to be sent by ordinary post to creditors for whom the plaintiffs have only a postal address.

4.    Pursuant to s 447A(1) of the Act, part 5.3A of the Act is to operate such that the requirement on the plaintiffs to issue notices under s 75-225(1) and s 75-15 of the Insolvency Practice Rules (Corporations) 2016 (Cth) be modified such that notice of the second meeting will be validly given to any creditors by not less than five business days prior to the date of the proposed meeting:

(a)    giving such notice electronically via email sent to the email address of any creditor (including persons claiming to be creditors) of the company for whom or which the plaintiffs hold an email address;

(b)    sending such notices to the postal address or facsimile number or otherwise provided for by the Act or the Corporations Regulations 2001 (Cth) to any creditors not being a creditor referred to in paragraph (a); and

(c)    causing such notice to be published in the insolvency notices website located at https://insolvencynotices.asic.gov.au/.

5.    The following parties have liberty to apply on giving all other interested parties not less than 3 business days’ notice:

(a)    any person who can demonstrate sufficient interest (including any creditor of the company) for the purpose of modifying or discharging orders (1) and (2) above; and

(b)    the plaintiffs, for the purposes of seeking any further extension of the convening period.

6.    The costs of and incidental to this application be costs in the voluntary administration of the company and to be paid out of the assets of the company.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from the transcript)

BROMWICH J:

1    This is an application for an extension of time of the convening period for a second meeting of creditors of Trigon Trading Pty Ltd (Administrators appointed) for the purposes of deciding the company’s future. The administration began on 16 December 2022. Such a meeting is required by s 439A(1) of the Corporations Act 2001 (Cth). Section 439A(5) provides for the period in which the meeting must take place, being within 20 business days of when the administration begins, unless that began in December or less than 25 days before Easter Friday, in which case, as in this case, it must take place within 25 business days. Section 439A(6) provides that the Court may extend the convening period on an application made during or after the period provided for by s 439A(5). Section 439A(7) provides that the Court may only extend the time if satisfied that this will be in the best interests of creditors.

2    There has already been a first meeting of creditors which took place on 28 December 2022 in accordance with s 436A(1) at which the initial joint administrators were replaced with the current joint administrators. The application is supported by an affidavit of one of the joint administrators, Mr Brett Lord, affirmed on 18 January 2023, and including an exhibit to that affidavit marked BSL-1. I have also been assisted by written submissions from counsel for the administrators highlighting the salient points.

3    The second meeting is presently required to take place by no later than 24 January 2023. Mr Lord deposes, and I accept, that he will be unable to have the necessary report and statement prepared for the second meeting that is required by s 75-225(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth). If the administrators remain obliged to convene the second meeting by that deadline, it is inevitable that it will need to be adjourned, such that leaving the existing obligation in place will be a waste of time and money. It is obvious that whenever possible, there should be only one, or at least as few, such meetings as possible.

4    The principles to be applied in considering granting the extension of time were conveniently summarised by Banks-Smith J in Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) (No 2) [2022] FCA 1563 (Algeri No 2) as follows:

[8]    When considering an application to extend the convening period, the Court must have regard to the objects of Part 5.3A set out in s 435A and reach an appropriate balance between the expectation that an administration will be undertaken in a relatively speedy and summary manner with the need to ensure that the administration is not concluded without consideration of sensible and constructive options directed towards maximising the returns for creditors and any return for shareholders: Diamond Press Australia Limited [2001] NSWSC 313 at [10] (Barrett J).

[9]    The administrator's view on such an application is significant and, particularly where the administration is complex, it should carry weight: In the matter of Renex Holdings (Dandenong) 1 Pty Ltd (administrators appointed) [2015] NSWSC 2002 at [9] (Black J).

[10]    In considering an application for an extension, the court must take into account the detriment to third parties, including the suspension of rights and remedies of secured creditors, lessors, and others: Shaw and Albarran (Joint and Several Administrators of Home Art Building Group Pty Ltd) v Home Art Building Group Pty Ltd (Administrators Appointed) [2016] WASC 274 (Beech J), where the principles are summarised at [18].

[11]    The court has recognised that interests of creditors can be prejudiced not only by delay but also by the convening of premature meetings, where the administrator has been unable to obtain adequate information for the preparation of the administrators' report in a form enabling creditors to make an informed decision: In the matter of Harrisons Pharmacy Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458 at [13] (Farrell J) and the cases there cited.

[12]    In In the matter of Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) [2009] NSWSC 585 at [13], Austin J identified the following relevant categories of cases in which an extension had been granted:

(a)    where the extension will allow the sale of the business as a going concern;

(b)    where the size and scope of the business in administration is substantial; and

(c)    more generally, where additional time is likely to enhance the return for unsecured creditors.

[13]    In Mighty River International Limited v Hughes [2018] HCA 38; (2018) 265 CLR 480, Nettle and Gordon JJ (in dissent, but not relevantly in this respect) cited many of the authorities in the area and observed:

[73]    Generally speaking, courts have been disposed to grant substantial extensions in cases where the administration has been complicated by, for example, the size and scope of the business, substantial offshore activities, large numbers of employees with complex entitlements, complex corporate structures and intercompany loans, and complex recovery proceedings, and, more generally, where the additional time is likely to enhance the return to unsecured creditors. Provided the evidentiary case for extension has been properly prepared, there has been no evidence of material prejudice to those affected by the moratorium imposed by the administration, and the administrator's estimate of time has had a reasonable basis, the courts have tended to grant extensions for the periods sought by administrators.

(footnote omitted)

5    Further, in In the matter of Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) [2009] NSWSC 585; 72 ACSR 352, cited in Algeri No 2, Austin J observed:

[13]    The reasons given for an extension in subsequent cases can be grouped into the following broad categories:

…

•    substantial offshore activities: Re Lehman Bros Australia Ltd [2008]NSWSC 1132;

…

•    complex transactions entered into by the company (for example securities lending or derivatives transactions): In Re Lift Capital Partners Pty Ltd (admin apptd) [2008] NSWSC 446;

•    complex prospects of recovery proceedings: Re Worrell; Coal Developments (German Creek) Pty Ltd v Cmr of Taxation (2007) 241ALR 667; [2007] FCA 1324;

•    lack of access to corporate financial records: Re Sims; Destra Corp Ltd[2008] FCA 2002; Re Fincorp Group Holdings Pty Ltd (2007) 62 ACSR 192; [2007] NSWSC 363;

…

•    the time needed for thorough assessment of a proposal for a deed of company arrangement: Silvia, Re Austcorp Group Ltd (admin apptd)[2009] FCA 636;

…

•    more generally, that additional times is likely to enhance the return for unsecured creditors: Deputy Commissioner of Taxation v Scottsdale Homes No Pty Ltd (No 2) [2009] FCA 190; Re Fitzgerald; Primebroker Securities Ltd (admin apptd) (recs and mgrs apptd) [2008] FCA 1247; Re Vouris; Marrickville Bowling and Recreation Club Ltd [2008] FCA 622.

[14]    The cases show that where a substantial issue in any of these categories is established (and a fortiori, where the facts fit into more than one category), the court tends to grant an extension, and the extension tends to be for the time sought by the administrator provided that the evidentiary case has been properly prepared, there is no evidence of material prejudice to those affected by the moratorium imposed by an administration, and the court is satisfied that the administrator’s estimate of time has a reasonable basis.

6    The burden of the above authorities is that an extension of time will be granted as sought by an administrator if there is no evidence of material prejudice to those affected and there is a reasonable basis for the additional time sought.

7    Counsel for the administrators submits, as supported by the affidavit of Mr Lord that:

TrigonX operates a cryptocurrency platform and is based on the Gold Coast, Queensland. The principal activity of TrigonX is digital asset trading.

TrigonX is wholly owned by Matteo Salerno, who is also the sole director and company secretary.

The plaintiffs’ investigations to date indicate that TrigonX voluntarily appointed administrators following TrigonX’s failure to meet the withdrawal demands of its two major clients (being unsecured non-related creditors).

Those demands followed shortly after the highly publicised corporate collapse of FTX Trading Ltd (FTX), an unrelated cryptocurrency exchange and hedge fund that went into Chapter 11 bankruptcy proceedings in the United States on 11 November 2022.

Australian entities associated with FTX Trading Ltd are also in administration and have had the time for the months: Re FTX Australia Pty Ltd and FTX Express Pty Ltd [2022] VSC 763.

The plaintiffs are in the process of conducting investigations into an account that TrigonX held with FTX, which TrigonX’s records suggest held USD$13 million prior to FTX’s system shutting down. The plaintiffs have not yet obtained statements for those FTX Accounts.

The first client (King River) claims to have been informed by TrigonX that whilst its account with TrigonX reportedly contained USD $20 million, in fact there was only USD$10 million in the account as the balance of the funds had been placed with FTX. King River also claims to have received an undertaking from TrigonX not to deal with USD $8 million in a bank account held with Signature Bank in New York, which it was told contained USD $10 million.

The second client (ADG Capital) claims to have been informed by TrigonX that AUD $5 million of its funds were “lost” when that instalment was purportedly routed via FTX. ADG Capital commenced proceedings against TrigonX in November 2022, prior to TrigonX’s administration, and apparently obtained an order that AUD $11 million be transferred from TrigonX’s account with Deltec Bank & Trust Limited (Deltec) to Court, and USD $988,000 be transferred to ADG Capital’s nominated account with Deltec. The plaintiffs need to make further enquiries to determine the status of these transfers.

Against that background, the plaintiffs’ application fits within a number of the established categories:

(a)    Substantial offshore activities/Complex transactions/Complex prospects of Recovery: One of the company’s main assets is an account with an American crypto-currency exchange, FTX, which is itself the subject of insolvency proceedings. The administrator requires further time to investigate and report on the prospects of recovery in respect of that offshore asset;

(b)    Lack of access to the company’s records: since their appointment on 28 December 2022, the plaintiffs have conducted significant investigations, but have only recently obtained access to TrigonX’s trading platform and certain of TrigonX’s books and records. The plaintiffs have not been able to complete their investigations into the business, property, affairs or financial circumstances of TrigonX. The plaintiffs still have not received confirmation from TrigonX’s secured creditor, Macquarie Bank, whether any amount is owing to it. The plaintiffs need further time to complete their investigations; and

(c)    Time to consider a DOCA: although no DOCA has yet been proposed, the correspondence with the legal representatives of Mr Salerno suggests there is some prospect of a proposal for creditors, which will require further time to consider and resolve.

It is also significant that none of the creditors have indicated any objection to the extension. Mr Salerno has however raised his concerns about the effect of the extension of the time to convene the second meeting on the business relationships of TrigonX and has asked for any extension of time to be short.

The plaintiffs submit that their request for a 45 business-day extension is reasonable and should be granted on the basis that:

(a)    this estimate of time has a reasonable basis, in that it has been estimated based on the plaintiffs’ experience of the administration to date and over 20 years’ experience in corporate restructuring, advisory and insolvency generally, as sufficient time to complete the necessary tasks for the plaintiffs to make their recommendation to creditors at the second creditors’ meeting, which will first require the plaintiffs to obtain the remainder of the books and records of TrigonX, investigate the whereabouts of the funds purportedly missing from the accounts of King River and ADG Capital and understand the involvement (if any) of FTX, conduct further investigations into FTX’s business, review the DOCA that has been foreshadowed by Mr Salerno and prepare and provide their report on the business, affairs and financial circumstances of Trigon X; and

(b)    There is no evidence of material prejudice to those affected by the moratorium imposed by the administration and, in any event, it is proposed that liberty to apply is reserved for those with sufficient interest.

8    I am satisfied not just that an extension of time is in the best interests of creditors, but also that the somewhat lengthy period of 9 weeks, being 45 working days, is justified in all the circumstances.

9    The orders that I will make are substantially as proposed and sought by the administrators.

Associate:

Dated:    27 January 2023