Federal Court of Australia

Cowan, in the matter of Coinful Capital Fund, SPC (in Official Liquidation) v Coinful Capital Fund, SPC (in Official Liquidation) [2025] FCA 315

ORDERS

A.     DEFINITIONS

1.    For the purpose of these orders, the following terms are defined as follows:

(a)    Cayman Islands CCF Proceeding means proceeding number FSD 86 of 2023 (IKJ) in the Grand Court of the Cayman Islands;

(b)    Cayman Islands CCMF Proceeding means proceeding number FSD 316 of 2023 (IKJ) in the Grand Court of the Cayman Islands;

(c)    CBIA means Cross-Border Insolvency Act 2008 (Cth);

(d)    CCF means the first defendant, Coinful Capital Fund, SPC (in Official Liquidation);

(e)    CCMF means the second defendant, Coinful Capital Master Fund, SPC (in Official Liquidation);

(f)    Lazarus means Lazarus Securities Pty Ltd (ACN 610 367 416); and

(g)    Model Law means Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law.

B.     RECOGNITION OF FOREIGN PROCEEDINGS

THE COURT ORDERS THAT:

2.    Pursuant to Article 17(1) of the Model Law:

(a)    the Cayman Islands CCF Proceeding, by which Andrew Childe and Anna Silver, of FFP Limited, were appointed as the Joint Official Liquidators of CCF on 5 July 2023, is recognised as a foreign proceeding for the purpose of the CBIA; and

(b)    the Cayman Islands CCMF Proceeding, by which the third plaintiff and Mr Childe were appointed as the Joint Official Liquidators of CCMF on 30 January 2024, is recognised as a foreign proceeding for the purpose of the CBIA.

3.    Pursuant to Article 17(2) of the Model Law:

(a)    the Cayman Islands CCF Proceeding is recognised as a foreign main proceeding for the purposes of the CBIA; and

(b)    the Cayman Islands CCMF Proceeding is recognised as a foreign main proceeding for the purposes of the CBIA.

THE COURT DECLARES THAT:

4.    The Cayman Islands CCF Proceeding is a “foreign proceeding” within the meaning of Article 2(a) of the Model Law.

5.    The first and second plaintiffs are each “foreign representatives” of the Cayman Islands CCF Proceeding within the meaning of Article 2(d) of the Model Law.

6.    The Cayman Islands CCMF Proceeding is a “foreign proceeding” within the meaning of Article 2(a) of the Model Law.

7.    The third and fourth plaintiffs are each “foreign representatives” of the Cayman Islands CCMF Proceeding within the meaning of Article 2(d) of the Model Law.

C.     STAY AND SUSPENSION ORDERS

THE COURT ORDERS THAT:

8.    Pursuant to section 6 of the CBIA and Article 21 of the Model Law, except with the consent of the first and second plaintiffs or with leave of the Court:

(a)    the commencement or continuation of individual actions or individual proceedings concerning CCF’s property rights, obligations or liabilities be stayed;

(b)    any execution against CCF’s property be stayed; and

(c)    the right to transfer, encumber or otherwise dispose of any property of CCF be suspended.

9.    Pursuant to section 6 of the CBIA and Article 21 of the Model Law, except with the consent of the third and fourth plaintiffs or with leave of the Court:

(a)    the commencement or continuation of individual actions or individual proceedings concerning CCMF’s property rights, obligations or liabilities be stayed;

(b)    any execution against CCMF’s property be stayed; and

(c)    the right to transfer, encumber or otherwise dispose of any property of CCMF be suspended.

THE COURT DECLARES THAT:

10.    Pursuant to s 16 of the CBIA and Article 20(2) of the Model Law, the stay and suspension described in orders 8 and 9 above be:

(a)    the same in scope and effect as if CCF and CCMF had been made the subject of a winding up under Part 5.4B of the Corporations Act 2001 (Cth); and

(b)    subject to the same powers of the Court and the same prohibitions, limitations, exceptions and conditions as would apply under the law of Australia in such a case.

D.     RELIEF GRANTED UPON RECOGNITION OF THE FOREIGN PROCEEDINGS

THE COURT ORDERS THAT:

11.    Pursuant to section 6 of the CBIA and Article 21(1)(e) of the Model Law:

(a)    the first and second plaintiffs be entrusted with the administration and realisation of all of the assets (and any proceeds thereof) of CCF located in Australia, including the power to appoint a local representative including, without limitation, a liquidator, subject to such terms as the Court may impose; and

(b)    the third and fourth plaintiffs be entrusted with the administration and realisation of all of the assets (and any proceeds thereof) of CCMF located in Australia, including the power to appoint a local representative including, without limitation, a liquidator, subject to such terms as the Court may impose.

12.    Pursuant to section 6 of the CBIA and Article 21(1)(d) of the Model Law:

(a)    the first and second plaintiffs may, as they deem appropriate but subject to any further order of the Court, examine witnesses, take evidence and obtain delivery of information concerning CCF’s assets, affairs, rights, obligations or liabilities, insofar as they relate to its dealings with Lazarus and its directors, Warren Goward and Dale Klynhout and the services provided by Lazarus to CCF; and

(b)    the third and fourth plaintiffs may, as they deem appropriate but subject to any further order of the Court, examine witnesses, take evidence and obtain delivery of information concerning CCMF’s assets, affairs, rights, obligations or liabilities, insofar as they relate to its dealings with Lazarus, Mr Goward and Mr Klynhout and the services provided by Lazarus to CCMF.

13.    Pursuant to section 6 of the CBIA and Article 21(1)(g) of the Model Law, and subject to the exceptions for which section 8 of the CBIA provides, all powers available to liquidators or administrators under the provisions of the Corporations Act are available to the plaintiffs, as if they were appointed under that Act, insofar as they relate to any proposed proceeding on behalf of the plaintiffs and defendants against Lazarus, Mr Goward and/or Mr Klynhout.

14.    Pursuant to section 6 of the CBIA and Article 21(1)(e) and (g) of the Model Law, the plaintiffs are authorised to, and have standing to, commence and conduct a proceeding on behalf of the plaintiffs and defendants against Lazarus, Mr Goward and/or Mr Klynhout.

15.    For the avoidance of doubt, the plaintiffs’ powers as set out in these orders may be exercised by the plaintiffs’ case manager in relation to CCF and CCMF.

16.    The plaintiffs forthwith serve notice of these orders on each creditor of the defendants known by the plaintiffs, by email and/or pre-paid post.

17.    The plaintiffs forthwith publish a notice of these orders in:

(a)    the Australian Financial Review, circulated nationally in Australia; and

(b)    the Cayman Compass, circulated in the Cayman Islands.

18.    The plaintiffs file an affidavit deposing to the steps taken to comply with orders 16 and 17 within 7 days of completing those steps.

19.    The plaintiffs’ costs of this proceeding be costs in the liquidations of CCF and CCMF.

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

REASONS FOR JUDGMENT

CHEESEMAN J:

INTRODUCTION

1    These reasons concern an ex parte application on notice for recognition of two foreign proceedings pursuant to the Cross-Border Insolvency Act 2008 (Cth) (CBIA) and related relief. The two proceedings are each proceedings in the Grand Court of the Cayman Islands and they concern the liquidation of the two defendants. I will refer to the proceedings as the CCF Proceeding and the CCMF Proceeding respectively.

2    The defendants, Coinful Capital Fund, SPC (in Official Liquidation) (CCF) and Coinful Capital Master Fund, SPC (in Official Liquidation) (CCMF), are entities incorporated in the Cayman Islands. Both companies are segregated portfolio companies (SPCs) registered as such under the Cayman Islands Companies Act (2025 Revision) (the Cayman Act).

3    The plaintiffs, Nicola Cowan and Kieran Clarke, employees of FFP Limited, are the current liquidators of CCF and CCMF.

4    The plaintiffs’ present principal purpose in seeking recognition in Australia of the CCF Proceeding and the CCMF Proceeding is to carry out investigations into the affairs of CCF and CCMF, including by conducting examinations, for the purposes of considering whether any claims lie against entities in Australia.

5    By an originating process filed on 20 February 2025, the plaintiffs seek recognition of the foreign insolvency proceedings under Arts 15 and 17 of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (the Model Law) as it is incorporated into Australian law by sections 6 and 8 of the CBIA. The plaintiffs also seek orders that each of the two foreign insolvency proceedings be recognised as “foreign main proceedings” pursuant to the CBIA and the Model Law and other related and ancillary relief. The plaintiffs moved on both the originating process and an interlocutory application also filed on 20 February 2025. Counsel appearing for the plaintiffs explained that the plaintiffs had adopted that course because of the requirement under r 15A.8(1) of the Federal Court (Corporations) Rules 2000 (Cth) that any relief sought under Art 21 of the Model Law must be made by filing an interlocutory process. The originating process and the interlocutory process were heard together. I was satisfied that in the circumstance of the present application it was appropriate to adopt that course: see Kellow, in the matter of Advanced Building & Construction Limited (in liq) v Advanced Building & Construction Limited (in liq) [2022] FCA 219 (Kellow (No 1)) at [20] (Derrington J) and Kellow, in the matter of Advanced Building & Construction Limited (in liq) v Advanced Building & Construction Limited (in liq) (No 2) [2022] FCA 781 (Kellow (No 2)) at [3] (Derrington J).

6    At the hearing on 2 April 2025, the plaintiffs were represented by counsel. The plaintiffs had, in accordance with my earlier orders, taken steps to serve and notify interested parties of the hearing. After the proceeding was called outside the Court, there was no appearance for any other party. The hearing proceeded.

7    The plaintiffs relied on the following evidence:

(1)    an affidavit of Ms Nicola Cowan, one of the liquidators of each of the defendants, sworn on 18 February 2025 and exhibit NC-1 to that affidavit; and

(2)    an affidavit of Mr Nicholas Mathew Roche, solicitor, affirmed on 26 March 2025. 

COMPLIANCE WITH SERVICE ORDERS

8    Before moving to the substance of the plaintiffs’ applications, I note that on 27 February 2025, I made ex parte orders which addressed the requirement for service and provided for a customised notification and publication regime in both Australia and the Cayman Islands.

9    In support of the application in respect of service, the plaintiffs relied on the affidavit of Ms Cowan, together with exhibit NC-1, and the affidavit of Mr Roche affirmed on 26 February 2025 in support of the interlocutory process.

10    Consistently with r 15A.6 of the Rules, I made orders directing the plaintiffs to serve notice of the filing of this proceeding substantially in accordance with the relevant form on each creditor of the defendants known by the plaintiffs, by email and/or pre-paid post, and to publish a notice of the filing of this proceeding in the Australian Financial Review, circulated nationally in Australia, and the Cayman Compass, circulated in the Cayman Islands.

11    I also made orders dispensing with the requirement for the plaintiffs to comply with r 2.7(1) by serving copies of the relevant documents on the defendant companies. I did so because I was satisfied that there would be no utility in complying with r 2.7(1) in circumstances where the defendants are companies in liquidation under the effective control of the plaintiffs and compliance would effectively require the liquidators to serve themselves: see Kellow (No 1) at [9] (Derrington J).

12    In the present applications, the plaintiffs by their evidence have established that they have complied with the orders made on 27 February 2025 relating to the service and publication of the notice of filing. The steps taken in order to comply with these orders are set out in Mr Roche’s affidavit of 26 March 2025. I will not repeat them. It is sufficient to note that the prescribed steps have been undertaken.

BACKGROUND

The foreign entities

13    CCF was incorporated in the Cayman Islands on 19 April 2018.

14    CCMF was incorporated in the Cayman Islands on 28 September 2021.

15    As mentioned, both CCF and CCMF were registered as SPCs under the Cayman Act. The status of both companies as SPCs assumed some significance in relation to whether the two Cayman Islands proceedings the subject of the recognition applications satisfied the relevant definition of a “foreign proceeding” in Art 2(a) of the Model Law. For that reason, it is convenient to say something at this stage about the SPC structure provided for under the Cayman Act.

SPCs under the Cayman Act

16    A SPC is a type of Cayman Islands entity which consists of a single legal entity which administers one or more “segregated portfolios” within its structure. Segregated portfolios operate as a means of segregating the assets and liabilities of the SPC as between particular segregated portfolios and as between any segregated portfolios and the general assets of the SPC which are not held within or on behalf of any of its segregated portfolios.

17    The distinction between the two categories of assets and liabilities of a SPC is provided for in s 219. First, the assets and liabilities that relate exclusively to a particular segregated portfolio within the SPC (the segregated portfolio assets) are the subject of s 219(2). Secondly, the assets and liabilities that do not relate to a particular segregated portfolio, (the general assets of the SPC) are the subject of s 219(3).

18    Segregated portfolios administered by a SPC do not have legal personality separate from that of the SPC: s 216(2).

19    Despite the segregated portfolio’s lack of a legal personality, through the SPC particular assets may be held and liabilities may be incurred by the SPC for or on behalf of a particular segregated portfolio administered by the SPC: s 216(1). A SPC is required to have procedures in place to segregate assets and liabilities and to maintain appropriate records which delineate between the assets and liabilities held for each segregated portfolio and the SPC’s general assets and liabilities: s 219. The directors of an SPC are under a duty to follow strict principles of segregation: s 219(6).

20    A receiver may be appointed to the property of a particular segregated portfolio pursuant to s 224. The receivership provisions in relation to SPCs and segregated portfolios are in Part 14 of the Cayman Act: ss 224-228. I interpolate to note that in the present context, there is no suggestion that a receiver has been appointed to any of the segregated portfolios maintained by the defendants. Indeed, the plaintiffs’ evidence to which I will come confirms that the plaintiff is not aware of any such appointments.

21    A SPC has the capacity to enter arrangements which are binding on or enure for the benefit of a segregated portfolio and the SPC must relevantly identify relevant segregated portfolio when executing such arrangements: s 218(1). Section 218(2) imposes steps that must be taken by a SPC director upon becoming aware of a breach of s 218(1).

22    Creditors of a particular portfolio have recourse only to that segregated portfolio’s assets (or subject to the company’s articles, to the general assets of the SPC if the segregated portfolio’s assets are insufficient and general assets are available): s 221(1). Creditors of one segregated portfolio do not have recourse to the assets of any other segregated portfolio even though the various portfolios are administered by the same SPC and that SPC is the sole relevant legal entity: ss 220-221. Similarly, creditors of an SPC with a liability unrelated to a particular segregated portfolio or portfolios only have recourse to the SPC’s general assets: s 221(2). When an SPC is placed in liquidation, the liquidator is required to observe the same principles of segregation in the winding up of the SPC: s 223.

23    It is instructive to extract s 221 in full:

(1)     Where a liability of a segregated portfolio company to a person arises from a matter, or is otherwise imposed, in respect of or attributable to a particular segregated portfolio —

(a)     such liability shall extend only to, and that person shall, in respect of that liability, be entitled to have recourse only to —

(i)    firstly, the segregated portfolio assets attributable to such segregated portfolio; and

(ii)    secondly, unless specifically prohibited by the articles of association, the segregated portfolio company’s general assets, to the extent that the segregated portfolio assets attributable to such segregated portfolio are insufficient to satisfy the liability, and to the extent that the segregated portfolio company’s general assets exceed any minimum capital amounts lawfully required by a regulatory body in the Islands; and

(b)     such liability shall not extend to, and that person shall not, in respect of that liability, be entitled to have recourse to the segregated portfolio assets attributable to any other segregated portfolio.

(2)     Where a liability of a segregated portfolio company to a person arises or is imposed otherwise than from a matter in respect of a particular segregated portfolio or portfolios, such liability shall extend only to, and that person shall, in respect of that liability, be entitled to have recourse only to, the company’s general assets.

24    In the ordinary course in a winding up under the Cayman Act, a company’s property will be applied in satisfaction of its liabilities pari passu subject to the rights of preferred, secured, and subordinated creditors: s 140(1)-(2). However, in the winding up of an SPC the operation of s 140 is “modified” so that in discharge of the claims of creditors, the company’s assets must be applied in accordance with Part 14 of the Cayman Act: s 223(2).

25    Section 223 provides:

(1)     Notwithstanding any statutory provision or rule of law to the contrary, in the winding-up of a segregated portfolio company, the liquidator —

(a)    shall deal with the company’s assets only in accordance with the procedures set out in section 219(6); and

(b)     in discharge of the claims of creditors of the segregated portfolio company and holders of segregated portfolio shares, shall apply the segregated portfolio company’s assets to those entitled to have recourse thereto under this Part.

(2)     Section 140 shall be modified so that it shall apply in relation to protected segregated portfolio companies in accordance with this Part and, in the event of any conflict between this Part and section 140, this Part shall prevail.

26    Section 219(6) is the expression of the segregation principle to which I have referred. It provides as follows:

(6)    It shall be the duty of the directors of a segregated portfolio company to establish and maintain (or cause to be established and maintained) procedures —

(a)    to segregate, and keep segregated, portfolio assets separate and separately identifiable from general assets;

(b)    to segregate, and keep segregated, portfolio assets of each segregated portfolio separate and separately identifiable from segregated portfolio assets of any other segregated portfolio; and

(c)    to ensure that assets and liabilities are not transferred between segregated portfolios or between a segregated portfolio and the general assets otherwise than at full value.

27    I will return to the relevance of the modification of the operation of the pari passu principle in s 140 by Part 14 of the Cayman Act in relation to each of CCF and CCMF when considering whether the CCF Proceeding and the CCMF Proceeding answer the statutory description of foreign proceedings in Art 2(a) of the Model Law.

28    CCF operated two segregated portfolios, Pierce 50 SP (formerly known as Pinnacle Liquid Enhanced Return Commodities Strategy 50) and DGC Fund SP (formerly known as Coinful Growth Fund SP). The DGC Fund SP was terminated and closed in August 2022. In July 2020, CCF was registered as a mutual fund with the Cayman Islands Monetary Authority (CIMA).

29    On 17 November 2021, by way of director resolutions, CCMF established two segregated portfolios, known respectively as the Coinful Master-Pierce 50 SP and the Coinful Master- DGC Fund SP. In February 2022, CCMF was registered as a mutual fund under the CIMA.

30    At all material times since incorporation, the directors of CCF and CCMF were Carlos Luis Salas Porras and Stephen Joseph Chor Lynch.

31    Mr Porras and Mr Lynch were also directors of Prism Capital Management Limited, a Cayman Islands exempted limited company registered with CIMA with a principal place of business in Taiwan. From 23 February 2022, Prism was the sole shareholder in CCF.

32    From 1 March 2022, CCF restructured into what is described as a master-feeder investment structure and became the Cayman Islands Feeder Fund of CCMF. The assets held by CCF on behalf of its segregated portfolios were transferred to CCMF’s segregated portfolios. The management of the shares in CCF were transferred from Mr Porras to Prism. Following the restructure, CCF had invested the entirety of CMF’s assets in CCMF.

33    Another aspect of the restructure was that Coinful Capital Fund LLC (CCF US) was incorporated in the state of Delaware in the United States as an offshore feeder fund for CCMF, with Prism as its managing member. CCF, CCMF, and CCF US operated together as the Coinful Group.

Lazarus Securities Pty Ltd

34    On 25 January 2016, Lazarus Securities Pty Ltd (ACN 610 367 416) was incorporated in Australia. At all material times, the directors of Lazarus were Warren Goward and Dale Klynhout. Mr Goward and Mr Klynhout are residents of Australia. At all material times, Lazarus held an Australian Financial Securities Licence.

35    On 16 December 2019, Lazarus and CCF executed an Investment Management Agreement (First Lazarus Agreement), which appointed Lazarus as a regulated investment manager for CCF. The registered office address of CCF on the face of the document is an address in Grand Cayman, Cayman Islands.

36    On 1 March 2022, Lazarus, CCF, CCMF and CCF US executed an amended Investment Management Agreement (Second Lazarus Agreement), which also appointed Lazarus as a regulated investment manager for CCMF and CCF US. Lazarus was required to manage the investment and reinvestment of the Coinful Group’s assets, including transacting through or with any counterparties of the Coinful Group and directing custodians of the Coinful Group’s assets. The registered office of both CCF and CCMF on the face of the document is a PO Box located in Grand Cayman, Cayman Islands.

37    From 1 March 2022 to 1 December 2023, Lazarus provided management services to the Coinful Group. During this period, it received more than USD$7.6 million in management and performance fees. A summary of the relevant payments made to Lazarus by CCF and CCMF, together with the supporting bank statements, is in evidence.

The foreign proceedings

The CCF Proceeding

38    On 5 April 2023, one of the investors in the Pierce 50 SP lodged a petition with the Grand Court of the Cayman Islands seeking that CCF be wound up as a result of CCF's failure to satisfy the investor’s redemption request. As outlined above, as at the date of the winding up orders, CCF was only operating one segregated portfolio, the Pierce 50 SP.

39    The petitioning investor was an investor in Pierce 50 SP. The investor sought to redeem the entire balance of his investment. As at 31 December 2022, the investor’s stake had a market value of USD$12,574,413.37. On 27 September 2022, the investor submitted a redemption request. As a result of CCF’s failure to satisfy the redemption request, on 7 February 2023, the investor served a statutory demand on CCF demanding payment. On 27 February 2023, the directors of CCF sent a letter to investors of CCF indicating that recent events had “significantly impacted [CCF’s] current liquidity position” and the steps taken by the directors of CCF included a suspension of redemptions.

40    On 5 July 2023, Doyle J of the Grand Court of the Cayman Islands ordered that CCF be wound up in accordance with the Cayman Act and appointed Andrew Childe and Anna Silver of FFP Limited as joint official liquidators.

41    Since the initial appointment of the joint official liquidators to CCF, there have been a number of changes to the identity of the liquidators. On 24 January 2024, Ms Silver resigned as an official liquidator of CCF. On 7 March 2024, Kawaley J of the Grand Court of the Cayman Islands made orders appointing Ms Cowan as an official liquidator of CCF. On 18 December 2024, Mr Childe resigned as an Official Liquidator of CCF. On 13 February 2025, Kawaley J of the Grand Court of the Cayman Islands made orders appointing Kieran Clarke as an Official Liquidator of CCF.

42    As at the date CCF was placed into liquidation, Ms Cowan deposes that CCF held USD$109,268 in a client trust account controlled by Lazarus, USD$25,600 representing the balance of a bank account with Signature Bank in the USA, and had recorded in its books and records that CCF held shares in CCMF, with an attributed value of USD$107.4 million.

43    On 24 August 2023, the first meeting of creditors of CCF was held and a report was produced by the joint official liquidators of CCF. That report is in evidence.

The CCMF Proceeding

44    In around February 2023, CCMF invested approximately USD$109 million with two custodians: LNS Financial Solutions and Trading (Pty) Limited, which is registered in South Africa, and BetterBrands Investment (Private) Limited, which is registered in Zimbabwe.

45    On 4 July 2023, Mr Porras and Mr Lynch resigned as directors of CCMF.

46    On 4 October 2023, an extraordinary general meeting of CCMF was called. CCF US as the majority shareholder of CCMF passed a special resolution pursuant to s 116(c) of the Cayman Act appointing Mr Childe and Ms Cowan as the joint voluntary liquidators of CCMF.

47    On 30 January 2024, Kawaley J of the Grand Court of the Cayman Islands ordered that the liquidation of CCMF be continued under the supervision of that Court in accordance with s 133 of the Cayman Act and appointing Mr Childe and Ms Cowan as the joint official liquidators of CCMF. The effect of the supervision order is provided in s 133 as follows:

A supervision order shall take effect for all purposes as if it was an order that the company be wound up by the Court except that:

(a)     the liquidation commenced in accordance with section 117; and

(b)     the prior actions of the voluntary liquidator shall be valid and binding upon the company and its official liquidator.

48    A report was produced by the joint official liquidators of CCMF dated 12 March 2024. That report is in evidence. On 18 December 2024, Mr Childe resigned as an official liquidator of CCMF. On 13 February 2025, Kawaley J of the Grand Court of the Cayman Islands made orders appointing Kieran Clarke as an official liquidator of CCMF.

49    As at the date CCMF was placed into liquidation, CCMF held USD$51,293.46 in a client trust account controlled by Lazarus.

PRINCIPLES APPLICABLE TO RECOGNITION

50    The Model Law has force in Australia pursuant to s 6 of the CBIA and pursuant to s 10 of the CBIA this court is competent to perform the functions set out in the Model Law.

51    By Art 15(1) of the Model Law, a foreign representative may apply to an Australian court for recognition of a foreign proceeding in which they have been appointed. 

52    Article 17(1) provides that subject to Art 6, a foreign proceeding shall be recognised if the following criteria are satisfied:

(a)     The foreign proceeding is one within the meaning of subparagraph (a) of Article 2.

(b)     The foreign representative applying for recognition is a person or body within the meaning of subparagraph (d) of Article 2.

(c)     The application meets the requirements of paragraph 2 of Article 15.

(d)     The application has been submitted to the Court referred to in Article 4 of the Model Law.

53    The court may refuse to take an action governed by the Model Law if the action would be manifestly contrary to public policy: Art 6.

54    The criteria fall into two categories: status-based criteria and procedural criteria: Kellow (No 2) at [9]-[22] (Derrington J).

55    The first status-based criteria is that the foreign proceeding must satisfy the definition in Art 2(a) of the Model Law which provides:

(a)    “Foreign proceeding” means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation;

56    The second status-based criteria is that the plaintiff must satisfy the definition of foreign representative in Art 2(d) of the Model Law which provides:

(d)     “Foreign representative” means a person or body, including one appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or the liquidation of the debtor’s assets or affairs or to act as a representative of the foreign proceeding;

57    The procedural requirements for making an application for recognition are that the application must be:

(1)    accompanied by material certifying the existence of the foreign proceeding and the appointment of the foreign representative: Art 15(2); and

(2)    made to a court “competent to perform functions under the Model Law”: Art 4.

CONSIDERATION

58    I will consider CCF and CCMF together to the extent possible and will diverge where necessary to consider whether particular aspects of the circumstances in each proceeding affect the statutory analysis, in particular the voluntary nature of the winding up process initiated in the CCMF Proceeding.

59    As mentioned, the plaintiffs’ present objective in seeking recognition in Australia is for the purpose of investigating the affairs of CCF and CCMF, including by engaging the examination mechanism available under s 596B of the Corporations Act 2001 (Cth), for the purpose of considering whether any claims lie against entities in Australia. An aspect of the ancillary relief sought in the present application is directed to investing the plaintiffs with the power to conduct examinations if the proceedings are recognised. In the event that the plaintiffs achieve both of those outcomes, the plaintiffs will still have to make application to the court for the issue of examination summonses.

60    The Grand Court of the Cayman Islands has made orders which recognise the plaintiffs’ intent to take this course. On 12 November 2024, Kawaley J made orders in the CCF Proceeding and the CCMF Proceeding, which were largely identical in their terms, and relevantly included the following order:

IT IS ORDERED that:

1.     The [plaintiffs in their capacity as joint official liquidators] be granted sanction to:

a.     take such actions as may be required or desirable to obtain recognition of their appointment in Australia and to make applications to the courts of that jurisdiction for that purpose;

…

c.     commence proceedings in Australia for the purpose of furthering their investigation of the Company’s affairs and failure against Lazarus Securities Pty Ltd and related persons, including proceedings to obtain relevant documents and information, and to enable the JOLs to examine persons likely to have knowledge relevant to the Company’s affairs and failure;

…

61    I will first address whether the two proceedings should be recognised as foreign proceedings before turning to the related and ancillary relief.

Recognition as a foreign proceeding

62    For the reasons which follow I am satisfied that the plaintiffs have established the jurisdiction of this Court to make the orders sought under Art 15 of the Model Law and s 13 of the CBIA. The plaintiffs have established that they have been properly appointed as liquidators by orders made in each of the proceedings in the Grand Court of the Cayman Islands. 

63    In terms of the procedural criteria set out at paragraph [57] above, the plaintiffs have satisfied the formal requirements of Art 15(2) and Art 4.

64    As to Art 15(2), the plaintiffs rely on the sealed orders of the Grand Court of the Cayman Islands in the CCF Proceeding and the CCMF Proceeding. As mentioned at paragraphs [40], [41],[47] and [48] above, the following orders are in evidence:

(1)    the sealed orders of the Grand Court of the Cayman Islands that CCF be wound up;

(2)    the sealed orders of the Grand Court of the Cayman Islands that the liquidation of CCMF be continued under the supervision of the court; and

(3)    the sealed orders of the Grand Court of the Cayman Islands appointing the plaintiffs as liquidators of CCF and CCMF.

65    This evidence is sufficient proof of the existence of the foreign proceeding and the appointment of the foreign representatives for the purposes of Art 15(2)(c).

66    As to Art 4, as mentioned, by reason of s 10(b)(i) of the CBIA, this Court is competent to perform functions under the Model Law relating to a proceeding involving a corporate debtor.

67    I now turn to the status-based criteria.

68    I am satisfied that the CCF Proceeding and the CCMF Proceeding are each a “foreign proceeding” as defined in the Model Law.

69    The definition of “foreign proceeding” under Art 2(a) of the Model Law is extracted above. It was uncontroversial that both the CCF Proceeding and the CCMF Proceeding answered the description of being a judicial proceeding in a foreign state pursuant to a law relating to insolvency in which the assets and affairs of the companies were subject to the control or supervision of a foreign court for the purpose of reorganisation or liquidation. The only aspect of the definition of foreign proceeding that warranted closer scrutiny was whether in the context of the special rules in relation to the liquidation of SPCs, the foreign proceedings answered the description of being relevantly “collective”. This issue was raised by counsel for the plaintiffs as a matter that called for careful consideration on the ex parte application.

70    The plaintiffs have properly flagged for my consideration whether the modification of the operation of s 140 of the Cayman Act in relation to the liquidation of a SPC takes the proceedings outside the notion of being a “collective judicial … proceeding” as that phrase is used in Art 2(a) of the Model Law.

71    The plaintiffs also drew to my attention that so far as their research revealed, this issue has not been the subject of consideration in any judgments they have been able to obtain. They did locate orders made on 13 November 2015 in which the Court appears to recognise the winding up of a SPC registered in the Cayman Islands as “foreign proceedings” for the purpose of Art 2(a) of the Model Law but it appears that reasons for judgment were either not delivered in respect of those orders or have not been located. In a later decision in those same proceedings, a different judge made procedural orders, supported by brief ex tempore reasons, granting an application made by the foreign representatives for the issue of an examination summons and production order in furtherance of their investigations into the relevant SPC: Dickson, in the matter of Centaur Litigation SPC (in liq) v Centaur Litigation SPC (in liq) [2016] FCA 585 (Yates J). There was no necessity in that application for the Court to revisit or address the issue of whether the proceedings were relevantly foreign proceedings for the purpose of Art 2(a) as the order recognising the proceedings as such had already been made.

72    My own searches have been similarly barren. There is a fleeting comment by Palmer J in Everest Capital Ltd & Anor v HSBC Bank plc [2009] NSWSC 185 at [1]:

…The Second Plaintiff is said to be something called a “cell of a segregated portfolio company incorporated in the Cayman Islands”. I have never encountered such a corporate entity, and its nature is unclear to me. …

73    In Australian Securities and Investments Commission v Avestra Asset Management Limited (In Liquidation) [2017] FCA 497; 348 ALR 525, Beach J refers to a number of segregated portfolio investment funds operated in the Cayman Islands by Cayman Islands SPCs being relevant in those regulatory proceedings, but not in a way that is presently relevant.

74    Although it appears that the ground may be relatively untrodden, I am satisfied that the modified operation of s 140 of the Cayman Act in relation to the liquidation of a SPC does not take the two proceedings presently under consideration outside the notion of being a “collective judicial … proceeding” as that phrase is used in Art 2(a) of the Model Law. The fact that the manner in which the pari passu principle is applied when dealing with the assets of the two SPCs the subject of these proceedings is subservient to the segregation principles embodied in s 219(6) and s 223 of the Cayman Act does not change that the liquidations are of each of the SPCs. The foreign proceedings the subject of this application are not concerned with the liquidation of the constituent segregated portfolios within the two SPCs. The Cayman Act does not appear to provide for the winding up of segregated portfolios – winding up is directed to the SPC itself, that is the corporate entity. That may be contrasted with the power to appoint receivers to the assets of an individual segregated portfolios under ss 224 and 225 of the Cayman Act. Although analogies are of limited use in contexts such as this, an analogy from an Australian perspective would be the power to appoint a receiver to trust property.

75    In each of the present foreign proceedings, the respective windings up affect creditors collectively because their debts are transformed into rights to participate in the distribution from the assets of the companies, albeit the manner in which the assets will be distributed will be informed by the statutory segregation applicable to SPCs and by the segregation principles which must be applied in accordance with s 223. The process is relevantly analogous in terms of its collective attribute to the more familiar liquidation scenarios described in Raithatha (liquidator) v Ariel Industries PLC (in creditors voluntary liquidation), in the matter of Ariel Industries PLC (in creditors voluntary liquidation) [2012] FCA 1526; 212 FCR 139 at [29] (Yates J) and Wong (Trustee), in the matter of Mackellar (Bankrupt) v Mackellar [2020] FCA 1151 at [33] (Derrington J).

76    For these reasons, I accept the plaintiffs’ submission that the “modification” to s 140 of the Cayman Act required by Part 14 in the case of a segregated portfolio company does not take the proceedings outside the notion of being “collective” in the sense required by Art 2(a) of the Model Law.

77    It is not controversial that a voluntary winding up falls within the definition of Art 2(a) on the basis that it is an administrative proceeding for the purposes of liquidation and the liquidators conducting such windings up are subject to the control or supervision of the courts: Kellow (No 2) at [18]-[21], citing Judge Gross of the United States Bankruptcy Court in Delaware in Re ABC Learning Centres Limited (2010) 445 BR 381 at [7]. In the present circumstances, the supervisory order made in the CCMF Proceeding renders what was a voluntary process, now a winding up by in effect court order.

78    For the purposes of the evidentiary requirements pursuant to Art 15(3) and s 13 of the CBIA, Ms Cowan gave evidence that she is not aware of any further proceedings that have been brought against CCF or CCMF, including proceedings against the companies in Australia under the Bankruptcy Act 1966 (Cth) or the Corporations Act. Ms Cowan is similarly not aware of the appointment of any receiver (within the meaning of s 416 of the Corporations Act), or controller or managing controller (within the meaning of s 9 of the Corporations Act) in relation to the property of CCF or CCMF.

79    I now turn to the recognition of the plaintiffs as foreign representatives within the meaning of Art 2(d) of the Model Law. “Foreign representatives” is defined in Art 2(d) of the Model Law as “a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or the liquidation of the debtor’s assets or affairs, or to act as a representative of the foreign proceeding”. It is clear in this context that the plaintiffs, as liquidators of CCF and CCMF, are foreign representatives of each of the foreign proceedings.

80    For completeness, Art 6 provides that the court may refuse to take an action governed by the Model Law if the action would be manifestly contrary to public policy in Australia. Counsel properly raised the recent discussion of the public policy exception in PricewaterhouseCoopers Inc in its Capacity as Foreign Representative of IE CA 3 Holdings Ltd v IE CA Holdings Ltd [2024] FCA 1208 (Markovic J). Justice Markovic concluded that the intention to carry out further public examinations did not offend against public policy in the circumstances of that case which were quite different to the present circumstances. Justice Markovic observed at [131] that the Art 6 exception is to be “construed restrictively and only invoked in exceptional circumstances in relation to matters of fundamental importance for Australia”. As mentioned at paragraph [59], the plaintiffs accept, as they must, that in order to exercise the power to conduct examinations, they will have to make an application to the Court for the issue of an examination summons. On the evidence before me, there is nothing to suggest that the public policy constraint is engaged.

81    Accordingly, I am satisfied that the plaintiffs are entitled to the relief they claim in relation to the recognition of the two foreign proceedings. I will now address the issue of whether that recognition should extend to recognition of the two proceedings as foreign main proceedings.

Recognition as a foreign main proceeding

82    Article 2(b) of the Model Law defines “foreign main proceeding” as “a foreign proceeding taking place in the State where the debtor has the centre of its main interests”.

83    Article 16(3) of the Model Law provides that in the absence of proof to the contrary, a company’s registered office is presumed to be the centre of the debtor’s main interest. This presumption may be rebutted if there are factors, objective and ascertainable by third parties (including creditors), warranting a conclusion that an “actual situation” exists which locates the centre of the debtor’s main interests somewhere other than the place of its registered office: see Kapila, in the matter of Edelsten [2014] FCA 1112; 320 ALR 506 at 517 [54] (Beach J); Wood v Astra Resources Ltd (UK Company No 07620218) [2016] FCA 1192 at [14] (White J).

84    The presumption applies in respect of CCF and CCMF as their registered office is located in George Town, Cayman Islands.

85    The other matters relied on by the plaintiffs in support of a finding that each of CCF’s and CCMF’s centre of main interests was and remains the Cayman Islands are as follows:

(1)    CCF and CCMF are incorporated under Cayman Islands law;

(2)    The memorandum and articles of association of CCF indicate that the original registered office of CCF was an address in the Cayman Islands;

(3)    the First Lazarus Agreement records the registered address of CCF as at 16 December 2019 as being in the Cayman Islands;

(4)    the Second Lazarus Agreement records the registered address of both CCF and CCMF as at 1 March 2022 as being in the Cayman Islands;

(5)    CCF’s and CCMF’s liquidations are being conducted solely by the Joint Official Liquidators who are employed by FFP Limited, a Cayman Islands registered company,

(6)    Prior to the appointment of the liquidators CCF and CCMF were registered with and subject to the supervision and regulation of the CIMA;

(7)    the CCF Proceeding and the CCMF Proceeding are subject to the supervision of the Grand Court of the Cayman Islands; and

(8)    CCF’s and CCMF’s liquidations are subject to the supervision of the Grand Court of the Cayman Islands.

86    Such evidence as is available supports the presumption that each of CCF and CCMF have their centre of main interest in the Cayman Islands. In addition to the above indicia relied on by the plaintiffs, I would add that the restructuring of the arrangements into a master-feeder investment structure (as described in the liquidators’ first report) was done on the basis that CCMF became the master fund and I would infer that as the master fund, CCMF was responsible for investments and trading activity. Accordingly, I am satisfied that it is appropriate to recognise each of the foreign proceedings as a foreign main proceeding.

Service and publication of order for recognition

87    Rule 15A.7 of the Rules provides requirements for service and publication in circumstances where the court makes an order for recognition.

88    The plaintiffs seek an order dispensing with the requirement for notice under r 15A.7 of the Rules for any orders made granting the relief sought in the originating process as well as in the interlocutory process: see Bankruptcy Office of the Canton of Geneva (Trustee) v Amoma SARL (In Liquidation), in the matter of Amoma SARL (No 2) [2023] FCA 1379 at [51] (McEvoy J) and Chong, in the matter of CNA Group Ltd v CNA Group Ltd [2015] FCA 1148 at [29] (McKerracher J).

89    Notwithstanding that notice of the hearing of the application was published in newspapers in Australia and the Cayman Islands and no interested party has sought to appear, I think it is appropriate to require compliance with rule 15A.7 in order that all interested parties may be informed of the outcome of the ex parte application. I will make orders accordingly.

Article 21 interlocutory application

90    As mentioned, the hearing before me was in respect of the originating process and the interlocutory application. It is not unusual to determine relief under Art 21 at the same time as the hearing of the recognition order: Kellow (No 2) at [42].

91    Article 21 of the Model Law provides:

1.     Upon recognition of a foreign proceeding, whether main or non-main, where necessary to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, grant any appropriate relief, including:

(a)     Staying the commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities, to the extent they have not been stayed under paragraph 1(a) of article 20;

(b)     Staying execution against the debtor's assets to the extent it has not been stayed under paragraph 1(b) of article 20;

(c)     Suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under paragraph 1(c) of article 20;

(d)     Providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor's assets, affairs, rights, obligations or liabilities;

(e)     Entrusting the administration or realization of all or part of the debtor's assets located in this State to the foreign representative or another person designated by the court;

(f)     Extending relief granted under paragraph 1 of article 19;

(g)     Granting any additional relief that may be available to [insert the title of a person or body administering a reorganization or liquidation under the law of the enacting State] under the laws of this State.

2.     Upon recognition of a foreign proceeding, whether main or non - main, the court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor's assets located in this State to the foreign representative or another person designated by the court, provided that the court is satisfied that the interests of creditors in this State are adequately protected.

3.     In granting relief under the present article to a representative of a foreign non – main proceeding, the court must be satisfied that the relief relates to assets that, under the law of this State, should be administered in the foreign non - main proceeding or concerns information required in that proceeding.

92    The power to make orders under Art 21 is discretionary. The exercise of discretion ought be informed by the purpose of the Model Law as described in the preamble:

The purpose of the present Law is to provide effective mechanisms for dealing with cases of cross-border insolvency so as to promote the objectives of:

(a)     Cooperation between the courts and other competent authorities of this State and foreign States involved in cases of cross-border insolvency;

(b)     Greater legal certainty for trade and investment;

(c)     Fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested persons, including the debtor;

(d)    Protection and maximization of the value of the debtor’s assets;

(e)     Facilitation of the rescue of financially troubled businesses, thereby protecting investment and preserving employment.

93    In Abate, in his capacity as Liquidator of Onix Capital SA [2017] FCA 751, Gleeson J said at [78]:

Relief may be granted under Art 21 “where necessary to protect the assets of the debtor or the interests of the creditors”. The word “necessary” in this context does not have the meaning of “essential”; rather it is to be “subjected to the touchstone of reasonableness”: cf. Pelechowski v Registrar, Court of Appeal [1999] HCA 19; 198 CLR 435 at [51].

94    The relief sought by the plaintiffs in the interlocutory process may be divided into three main categories. First, orders which facilitate the investigations which the plaintiffs wish to advance in Australia. Secondly, orders which facilitate the plaintiffs to administer property and assets of CCF and CCMF in Australia. Thirdly, orders staying the commencement or continuation of proceedings concerning CCF’s and CCMF’s property rights, and any execution against CCF’s and CCMF’s property. I will address each category of order sought in turn.

95    It is in the interests of creditors for the plaintiffs to carry out the proposed investigations, which relevantly may include the examination of Mr Goward, Mr Klynhout and such other persons as the plaintiffs consider necessary and also taking delivery of documents relating to the affairs of CCF and CCMF.

96    As mentioned, Mr Goward and Mr Klynhout were directors of Lazarus, which collected over USD$7 million in management and performance fees for the management and reinvestment of the Coinful Group's assets. In circumstances where the substantial assets of the Coinful Group are almost entirely unaccounted for, the plaintiffs seek to use any information obtained from the examinations of Mr Goward and/or Mr Klynhout to consider whether CCF and/or CCMF may have claims against Lazarus and its directors, personally.

97    To the extent that the plaintiffs’ investigations identify property and assets in Australia, the plaintiffs seek an order that the plaintiffs be entrusted with the administration and realisation of property and assets (and any proceeds thereof) of CCF or CCMF located in Australia, including the power to appoint a local representative including, without limitation, a liquidator, subject to such terms as the Court may impose.

98    I am satisfied that it is consistent with the overarching purpose in s 37M of the Federal Court of Australia Act 1976 (Cth), and with the purposes of the Model Law, as identified above, for that relief to be granted. Notwithstanding that the proposed powers may never fall to be exercised, it does not cause any prejudice to any party for the plaintiffs to be granted such powers at this stage and there is efficiency and economy in doing so.

99    Where, as here, a foreign proceeding is recognised as a “foreign main proceeding”, it is not necessary to identify specific assets located in Australia to establish that relief under Art 21 is “necessary”. It is enough that there are potential examinees in this jurisdiction: PricewaterhouseCoopers at [161]-[170] (Markovic J).

100    Section 16 of the CBIA provides that the scope and modification or termination of, relevantly, the stay referred to in Art 20(1) of the Model Law is the same as if the stay arose under Ch 5 of the Corporations Act (other than Pt 5.2 and Pt 5.4A). It is appropriate to make the orders sought in this respect by the plaintiffs.

CONCLUSION

101    For these reasons, I am satisfied that each of the CCF Proceeding and the CCMF Proceeding in the Grand Court of the Cayman Islands should be recognised, first, as a foreign proceeding for the purposes of Art 17(1) and, secondly, as a foreign main proceeding for the purposes of Art 17(2).

102    I will also make orders for the purposes of protecting the assets of CCF and CCMF within Australia under Art 21(1) in a form that is based on the short minutes provided by the plaintiffs and modified following the hearing. In their capacity as foreign representatives, the liquidators will have similar powers to those of a liquidator appointed under the Corporations Act.

Associate:

Dated:    4 April 2025

SCHEDULE OF PARTIES