Supreme Court New South Wales Medium Neutral Citation: In the matter of DCA Capital Pty Ltd ACN 629 833 129 [2024] NSWSC 261 Hearing dates: 1 March 2024 Date of orders: 15 March 2024 Decision date: 15 March 2024 Jurisdiction: Equity - Corporations List Before: McGrath J Decision: Application to set aside statutory demand dismissed with costs Catchwords: CORPORATIONS — Winding up — Statutory demand — Application to set aside — Application of Graywinter principle — Where the affidavit in support of application adequately supports the application — where plaintiff bears burden of proof and evidential onus of establishing genuine dispute — where there is a failure to discharge that onus — HELD — application dismissed with costs Legislation Cited: Corporations Act 2001 (Cth) Evidence Act 1995 (NSW) Cases Cited: Charles v Federal Commissioner of Taxation (1954) 90 CLR 598 Chianti Pty Ltd v Leume Pty Ltd [2007] WASC 270 ElecNet (Aust) Pty Ltd v Federal Commissioner of Taxation (2016) 259 CLR 73; [2016] HCA 51 Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; (1996) 21 ACSR 581 Gustode Pty Ltd v Ashley [2011] FCA 250 Hopetoun Kembla Investment Pty Ltd v JPR Legal Pty Ltd (2011) 87 ACSR 1; [2011] NSWSC 1343 In the matter of JDH Capital Pty Ltd [2024] NSWSC 164 In the matter of Norwest Legal Services Pty Ltd [2019] NSWSC 1896 Ligon 158 Pty Ltd v Huber (2016) 117 ACSR 495; [2016] NSWCA 330 Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330 NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd (2010) 79 ACSR 544; [2010] NSWCA 210 Re ABA Villawood Place Pty Ltd [2023] NSWSC 952 Re Wollongong Coal Ltd (2015) 110 ACSR 134; [2015] NSWSC 1680 Sceam Construction Pty Ltd v Clyne (2021) 64 VR 404; [2021] VSCA 270 Category: Principal judgment Parties: DCA Capital Pty Ltd ACN 629 833 129 (Plaintiff) Archener Pty Ltd CAN 081 353 988 ATF O'Keefe Family Trust (Defendant) Representation: Counsel: B Arste (Plaintiff) H Somerville (Defendant) Solicitors: Kerrs (Plaintiff) Bridges Lawyers (Defendant) File Number(s): 2023/00429552 Publication restriction: Nil JUDGMENT INTRODUCTION 1. This application is brought by the plaintiff, DCA Capital Pty Ltd ACN 629 833 129, under Part 5.4 of the Corporations Act 2001 (Cth) by originating process filed 27 November 2023, seeking an order pursuant to s 459G(1) of the Corporations Act setting aside the statutory demand dated 6 November 2023 issued by the defendant, Archener Pty Ltd ACN 081 353 988 ATF O'Keefe Family Trust, to DCA Capital. 2. The statutory demand is for payment of an alleged debt in the amount of $996,407.30. That alleged debt is said to represent the amount payable by DCA Capital to Archener for the redemption of units held by Archener in the Digital Commodity Assets Fund (DCA Fund), a unit trust of which DCA Capital was the trustee. 3. In these proceedings, DCA Capital relies solely on s 459H(1)(a) of the Corporations Act, seeking to demonstrate that there is a genuine dispute between DCA Capital and Archener as to the existence and the amount of the debt to which the statutory demand relates. EVIDENCE 1. In support of its application, DCA Capital relies on the following evidence: 1. affidavit of Ashod Balanian affirmed 27 November 2023 (Balanian affidavit) and the exhibit to that affidavit; and 2. the Constitution for the DCA Fund dated 2 May 2018. 1. In resisting the application, Archener relies on the affidavit of Sonia O'Keeffe sworn 22 January 2024 and the exhibit to that affidavit. 2. At the hearing before me, Ms B Arste appeared for DCA Capital, instructed by Kerrs. Mr H Somerville appeared for Archener, instructed by Bridges Lawyers. SALIENT FACTS 1. On 2 May 2018, the DCA Fund was established by the Constitution. The DCA Fund was set up as a wholesale Australian unit trust to trade in digital commodities, with Digital Commodity Assets Pty Ltd (DCA) designated as the Responsible Entity and trustee. The relevant terms of the Constitution are considered in more detail below. 2. On 5 November 2018, DCA Capital was incorporated. 3. At some point after 5 November 2018 and before August 2021, DCA Capital became the trustee of the DCA Fund in place of DCA, but the evidence did not reveal when and how that occurred. There was no issue between the parties as to DCA Capital being the trustee of the DCA Fund. 4. In March 2021, DCA Capital issued an Information Memorandum to potential investors in the DCA Fund (March 2021 IM). The relevant terms of the March 2021 IM are considered in more detail below. The admissibility of the March 2021 IM as evidence on the application was challenged by Archener. 5. At an unspecified date, the March 2021 IM was issued to Archener. 6. On 19 August 2021, Sonia O'Keeffe and Patrick O'Keeffe, as directors of Archener, signed the Application Form to invest in the DCA Fund and lodged it with DCA Capital. The Application Form refers to DCA Capital in its capacity as trustee of the DCA Fund and to the March 2021 IM, and indicates that Archener applied to invest $455,000 in the DCA Fund. 7. The Application Form states that it accompanies the March 2021 IM issued by DCA Capital in its capacity as trustee of the DCA Fund. It contains numerous details about Archener, including the identification of the ANZ bank account in the name of Archener into which the "credit of withdrawals and credit of distributions" were to be made. It also contains the following statements: When you complete this Application Form you make the following declarations: I/we have read and understood the [March 2021 IM] to which this Application Form applies, including any supplemental information; … I/we agree to be bound by the provisions of the Trust Deed governing the Fund and the terms and conditions of the [March 2021 IM], each as amended from time to time; … 1. On 23 August 2021, Archener transferred $415,000 into the bank account nominated by DCA Fund in the Application Form. 2. On 24 August 2021, Archener transferred a further $40,000 into that same account. 3. On 24 August 2021 at 4:09pm, DCA Fund sent an email to Sonia O'Keeffe acknowledging the receipt of the total amount of $455,000 from Archener as its investment in the DCA Fund and acknowledging the request made by Archener for split monthly reporting of the Archener investment in the DCA Fund into three separate accounts: Archener ATF O'Keeffe Family Trust 1 ($400,000), Archener ATF O'Keeffe Family Trust 2 ($15,000) and Archener ATF O'Keeffe Family Trust 3 ($40,000). 4. On 24 November 2021, DCA Capital sent a subscription confirmation to Archener stating that it had been issued with 127,623.413 units in the DCA Fund at an offer price of $3.45929081, being a net subscription amount of $441,486.50 after the deduction of an account set up fee of $13,513.50. 5. On 20 June 2022, Sonia O'Keeffe and Patrick O'Keeffe, as directors of Archener, signed two Additional Investment Forms to invest further amounts of $300,000 and $15,000 in the DCA Fund and lodged those forms with DCA Capital. 6. On 20 June 2022, Archener transferred $329,000 into the same bank account that had been nominated by DCA Fund in the Application Form. 7. On 21 June 2022 at 12:28pm, DCA Fund sent an email to Sonia O'Keeffe acknowledging the receipt of the total amount of $329,000 from Archener as its additional investment in the DCA Fund. 8. On 8 November 2022, the DCA Fund issued three transaction reports in relation to the investment of Archener in the DCA Fund as at 30 September 2022, which evidenced that Archener ATF O'Keeffe Family Trust 1 had a balance of $842,258.14, Archener ATF O'Keeffe Family Trust 2 had a balance of $67,802.47, and Archener ATF O'Keeffe Family Trust 3 had a balance of $35,433.90, totalling $945,494.51. 9. On 21 March 2023, Sonia O'Keeffe and Patrick O'Keeffe, as directors of Archener, completed three Redemption Request Forms asking for a full withdrawal of funds from the DCA Fund, with the payment of the redemption proceeds to be made into a nominated bank account of Archener. 10. On 21 March 2023 at 2:14pm, Sonia O'Keeffe sent an email to the DCA Fund attaching the completed Redemption Request Forms for each of the O'Keeffe Family Trusts 1, 2 and 3 accounts. 11. On 27 March 2023, each of the Redemption Request Forms was sent via registered mail to DCA Capital. 12. On 6 November 2023, the statutory demand and accompanying affidavit of Sonia O'Keeffe sworn 6 November 2023 were served on DCA Capital under a covering letter from the solicitors for Archener, Bridges Lawyers. The statutory demand sought payment of the debt described (leaving grammatical errors in place) as "[a]mount due and payable by the Company [DCA Capital] to the Creditor [Archener] being the redemption price payable by the Company [DCA Capital] pursuant to clause 4.2 of the Digital Commodity Assets Fund Information Memorandum dated May 2021 following the giving a redemption requests by the Creditor on 23 March 2023" with the "amount of the debt (incl. GST)" stated to be $996,407.30. 13. On 27 November 2023, the solicitors for DCA Capital, Kerrs, sent a letter to Bridges Lawyers asserting that the statutory demand was capable of being set aside on the ground that there was a defect in the demand due to the failure of the affidavit of Sonia O'Keeffe to evidence the trust relationship between Archener and the O'Keeffe Family Trust, and that there was a genuine dispute as to the validity of the debt on the basis that the statutory demand was issued against the incorrect entity. The letter invited the immediate withdrawal of the statutory demand by Archener and an undertaking from it not to take any further action on the statutory demand. 14. On 27 November 2023, DCA Capital filed the originating process applying to set aside the statutory demand. RELEVANT PARTS OF THE CONSTITUTION AND THE MARCH 2021 IM 1. The following are relevant parts of the Constitution: PARTY Digital Commodity Assets Pty Ltd ACN 619 068 781 of Level 57, MLC Centre, 19 Martin Place, Sydney NSW 2000 (DCA). OPERATIVE PROVISIONS 1 THE TRUST Creation of the Trust 1.1 The Trust to be known as the 'Digital Commodity Assets Fund' is taken to have been established under this document. 1.2 The Responsible Entity is the trustee of the Trust established under this document and must hold the Assets of the Trust on trust for the Unitholders of the Trust. 1.3 The Responsible Entity must perform its obligations in accordance with this document and the applicable laws. The Responsible Entity has absolute discretion in doing so. … 2 UNITS IN THE TRUST Creation of Units in the Trust 2.1 The beneficial interest in the Trust is divided into Units. Each Unitholder has a beneficial interest in the Trust as a whole but not in any specific part or assets of the Trust. … Classes of Units 2.6 The Responsible Entity may issue and divide Units into Classes. Each Class carries such rights and entitlements as set out in this document and in any Disclosure Document under which the Unit was applied for or any Disclosure Documents thereof. Subject to this document, each Unit confers on its holder identical rights to those conferred by each other Unit of that Class. Applications 2.7 The Responsible Entity may create forms to assist in making Applications. 2.8 A person may apply to the Responsible Entity to be issued Units. If an applicable law requires it, an Application must be made on an application form. The manner in which an Application may be given is to be determined by the Responsible Entity. 2.9 Unless an applicable law provides otherwise, application forms for the issue of Units must be accompanied by either: 2.9.1 the appropriate Application Money; or 2.9.2 … … 2.12 The Responsible Entity must record an applicant's name in the Register of Unitholders on the day the Responsible Entity Accepts the Application, or as soon as practicable afterwards. … Issue of Units 2.15 Except in the case of a reinvestment of Distribution in accordance with this document, Units are taken to be issued to a person at the time which is the earlier of: 2.15.1 the time the issue of Units is recorded in the Register of Unitholders; and 2.15.2 the later of the time when: (a) the Responsible Entity Accepts the Application; and (b) the Responsible Entity receives Application Money (even if the moneys are paid or to be paid in to the Application Account) or any property forming part of the Application Money against which Units are to be issued is vested in the Responsible Entity. 2.16 At the time when Units are taken to be issued to a person under clauses 2.15 or 2.18: 2.16.1 the person becomes a Unitholder in respect of the Units, which are taken to be issued even though the number of Units may not yet have been ascertained and the issue has not yet been entered into the Register of Unitholders; and 2.16.2 the person becomes entitled to be recorded in the Register of Unitholders as the holder of those Units as soon as it is reasonably practicable for the Responsible Entity or its agent to make the entry. … Issue Price of Units 2.19 The price at which the initial Units are to be issued will be AUD$1.00 per Unit. … Becoming a Unitholder 2.25 Subject to clause 2.16, a person becomes the holder of a Unit when his or her name is recorded on the Register of Unitholders in relation to that Unit. A person ceases to be the holder of a Unit when his or her name ceases to be recorded on the Register of Unitholders in relation to that Unit. 2.26 The recording of a person's name on the Register of Unitholders in relation to Units is the sole evidence of title to those Units. 2.27 The Responsible Entity must keep a Register of Unitholders and record in it the name of each person to whom Units are issued, the number of Units issued to each of those persons, the Class and any other matters the Responsible Entity considers necessary or desirable. The Register may be maintained in one or more separate parts at different locations. The Responsible Entity may maintain other Registers. … Withdrawals 2.29 The Responsible Entity may create forms to assist in Withdrawal Requests. 2.30 A Unitholder may apply to the Responsible Entity to withdraw Units. If an applicable law requires it, a Withdrawal Request must be made on a withdrawal form. The manner in which a Withdrawal Request may be given is to be determined by the Responsible Entity. 2.31 A Withdrawal Request may not be withdrawn without the consent of the Responsible Entity. … 2.35 The Responsible Entity must in respect of a Withdrawal Request, within twenty-one (21) days of the Valuation Time on which the unit price of the Units are determined in accordance with clause 2.36 (or any longer time as is permitted by virtue of the operation of clauses 2.46 to 2.49), cause the redemption of such part of the Unitholder's interest in the Trust as equals the amount of the withdrawal (including effect the payment of the withdrawal proceeds or effect a transfer in accordance with clause 2.43), subject to clause 2.42. 2.36 The price of a Unit of a Class at which a Withdrawal Request from the Trust is effected (Withdrawal Price) will be: 2.36.1 the Value of that Class; 2.36.2 divided by the number of Units of that Class on issue, less Transaction Costs expressed on a per Unit basis, the result being rounded down to the next 1/100th of a cent calculated as at the next Valuation Time after receipt of the Withdrawal Request, as determined by the Responsible Entity in accordance with and subject to clause 2.38. 2.37 Upon receipt of a Withdrawal Request: 2.37.1 the Responsible Entity may at its discretion determine that a portion of the withdrawal amount to be paid to that Unitholder represents a share of the Divisible Income, except where the provisions in clause 3.25 apply to the Trust at that time; 2.37.2 where the Responsible Entity makes a determination under clause 2.37.1, the portion of withdrawal amount representing Divisible Income will be determined by reference to: (a) the withdrawing of Unitholder's share of the undistributed Divisible Income of the relevant Class as at the Valuation Time for the relevant Withdrawal Request, determined in accordance with clause 3; and (b) the increase in the Divisible Income as a result of the Responsible Entity realising sufficient Assets to satisfy the Withdrawal Request; and 2.37.3 where the Responsible Entity makes a determination under clause 2.37.1, the Responsible Entity must notify the Unitholder of the composition of the withdrawal amount so determined. … 2.43 If a Unitholder requests or if the Responsible Entity considers that it is in the best interests of the Unitholder who made the Withdrawal Request or Unitholders as a whole, the Responsible Entity may transfer the Assets to a Unitholder, or hold Assets on trust solely for a Unitholder, rather than pay cash on withdrawal. These Assets must be of a Value equal to the proceeds of a Withdrawal Request due to a Unitholder and be valued as at the same Valuation Time with which the Withdrawal Request is being processed in accordance with clause 2.36 and in the same manner provided for in clause 3.4 (including being valuations consistent with the range of ordinary commercial practice for valuing assets of the relevant type and being reasonably current). … Rights of Unitholders 2.54 This document is legally enforceable as between each Unitholder and the Responsible Entity. 2.55 Each Unitholder has the benefit of and is entitled to enforce this document even though the Unitholder is not a party to or may not be a Unitholder at the time of execution and delivery of this document. 2.56 Each Unitholder (and all persons and claims through the Unitholder) will be bound by this document as if they were a party to this document. 2.57 A Unitholder is not entitled to do any of the following: 2.57.1 interfere with the exercise of the powers of the Responsible Entity; or 2.57.2 exercise a right or claim an interest in respect of an Asset (including lodging a caveat or other notice affecting an Asset); or 2.57.3 require the transfer to it of an Asset of the Trust. 2.58 A Unitholder must pay any expenses that are referrable to his or her Application, Withdrawal Request, Application Money and Units. The Responsible Entity may refuse to act in relation to that Unitholder if those expenses are not paid. … 3 INVESTMENTS, INCOME AND DISTRIBUTIONS … Valuation of Assets 3.2 The Responsible Entity may Value an Asset, or appoint an adviser or service provider to Value the Asset at any time, and must do so as and when required by the Corporations Act 2001. 3.3 The Responsible Entity may determine, or instruct an advisor or service provider to determine, the Value of a Class or the Trust at such times (Valuation Time) as it considers necessary or desirable (but no less frequently than each month). 3.4 The Value of an Asset for the purpose of calculating the Value of a Class or the Trust will be its market value determined in accordance with Australian accounting principles. Where there is no market value, the valuation methods and policies applied by the Responsible Entity must: 3.4.1 produce valuations that are: (a) consistent with the range of ordinary commercial practice for valuing assets of the relevant type; (b) reasonably current (based on the type of asset) where used to calculate the issue price for Units (in accordance with clause 2.21) and calculate the Withdrawal Price for Units (in accordance with clause 2.36); and 3.4.2 be in accordance with Australian accounting principles. … 16 DEFINITIONS AND INTERPRETATION Definitions 16.1 In this document, the following definitions apply: … Asset means any property held by or on behalf of the Responsible Entity on trust for the Unitholders and includes any income accruing on and rights relating to that property. … Class means a class of Units. … Liabilities in relation to the Value of a Class or the Trust, means all present liabilities of the Class or the Trust (as applicable), including all Taxes, liabilities accrued but not yet paid, borrowings, unpaid costs, charges, expenses, outgoings, fees, contingent liabilities, unpaid amounts due to a Unitholder, unpaid remuneration due to the Responsible Entity and any provision which the Responsible Entity decides should be taken into account in determining the liabilities of the Class or the Trust (as applicable). … Trust means the 'Digital Commodity Assets Fund'. … Unit means a unit in the Trust issued under this document. Unitholder means a person recorded on the Register of Unitholders as a holder of Units from time to time or otherwise stated to be a Unitholder in accordance with clause 2.16 any other provision of this document. Valuation Time means the time the Responsible Entity has determined in accordance with clause 3.3 to determine the Value of a Class or the Trust. Value, in relation to an Asset, means the value of the Asset as determined in accordance with the Responsible Entity's valuation methods and policies in clause 3.4. Value, in relation to a Class, means the value of the Assets allocated to the Units of the Class less the Liabilities allocated to Units of the Class. Value, in relation to the Trust, means the Value of the Assets of the Trust less the Liabilities of the Trust. Withdrawal Price means the term provided for in clause 2.36. Withdrawal Request means an application for a withdrawal of Units. … 1. Relevant extracts of the March 2021 IM are as follows (footnotes omitted): IMPORTANT INFORMATION DCA Capital Pty Ltd (ACN 629 833 129) (DCA) is the trustee (Trustee) of the Digital Commodity Assets Fund (Fund). The Trustee is the issuer of units in the Fund and the investment manager (Investment Manager) of the Fund. The Trustee is an Australian incorporated company and an Australian financial services authorised representative (Representative number [####]). … Note - the return of capital and the performance of the Fund is not guaranteed by any person or organisation, including the Trustee and Lanterne Fund Services. … This offer to subscribe for a Class of units in the Fund is only made to Wholesale Clients. The offer is personal to the person to whom it has been sent and the information contained in the Information Memorandum is provided on a confidential basis for the purpose of making a decision as to whether to invest, and is not to be reproduced or distributed to any other persons (other than professional advisers of the prospective investor receiving this Information Memorandum). … 2. DIGITAL COMMODITY ASSETS PTY LTD DCA Capital Pty Ltd (DCA) is an independent, privately owned management company operating in the digital commodity market. DCA acts as both Trustee and Investment Manager of the Digital Commodity Assets Fund (Fund). As Trustee, we are responsible for managing your investment, for your benefit, in accordance with the Constitution. As Investment Manager, we are responsible for the trading strategies and managing the assets of the Fund. DCA is a corporate authorised representative (Representative number [001 284 324]) of Lanterne Fund Services Pty Ltd (AFSL No. 238198). This Australian financial services authorisation permits DCA to provide funds management services to Wholesale Clients only. … 3. ABOUT THE FUND … 3.1 Fund Structure The Fund is a wholesale Australian resident unit trust (not listed on the ASX). … 4. INVESTING AND WITHDRAWING 4.1 Application for Fund units Minimum Initial Investment The minimum initial investment is A$50,000, subject to the Trustee's discretion to accept a lower amount. The Trustee may in its discretion raise or lower the minimum initial investment amount provided that the status of the investor as a Wholesale Client is not prejudiced. Minimum Additional Investment The minimum amount for additional investments is A$25,000, subject to the Trustee's discretion to accept a lower amount. Application Acceptances In respect of each initial and additional investment, an investor must qualify as a Wholesale Client. Applications are accepted at the absolute discretion of the Trustee. Rejected, invalid or incomplete applications will be returned to applicants as soon as possible. Interest is not payable on rejected or accepted application monies. Any interest derived on application monies may be retained by the Trustee. … 4.2 Redemption of Fund Units Minimum Redemption The minimum redemption is A$10,000 (or such lesser amount as the Trustee may determine). A requested partial redemption which would cause the investor's account to fall below the minimum holding of A$25,000, or such lesser amount as the Trustee may determine, may not be permitted. Redemption Processes and Cut Off Times Investments can be redeemed by mailing or emailing a redemption request. The redemption request must be signed by the investor, state the amount in dollars and account name. If a partial redemption is being processed, the units held longest will be redeemed first unless instructed otherwise. Investors should note that redemption proceeds will only be paid into the original account in the name of the investor from which the application proceeds were derived. Redemptions are processed on the 1st Business Day of each quarter (Redemption Day). Redemption quarters commence on February, May, August and November. A Redemption request must be received no later than 4pm AEST at least three (3) Business Days prior to the next Redemption Day. The redemption price is the Unit Price on the Valuation Day, prior to the Redemption Day. In the ordinary course of business, it is expected that proceeds from redemptions will be available within forty two (42) calendar days after the Valuation Time on which the unit price of the units are determined. Redeeming unitholder When units are redeemed, to the extent the redemption proceeds exceed the initial issue Unit Price of the redeemed units, such amount will be treated as a dividend for tax purposes and may be franked. … 4.4 Unit Pricing When you invest, you are allocated a number of units in the Fund. Each of these units represents an equal undivided part of the market value of the portfolio value attributable to the Fund. As a result, each unit has a dollar value or Unit Price. The Unit Price is calculated by dividing the total asset value of the Fund, less its liabilities (namely the Net Asset Value), by the total number of units held by investors on that day. All Unit Prices are calculated and rounded up to a 1/100th of a cent. The number of units issued are calculated and allocated to the 4th decimal place (rounded up). The market value of the Fund will be determined as at midnight (New York time) of the Valuation Day. The Net Asset Value of the Fund includes the value of income accumulated since the previous distribution date. 4.5 Valuation In determining the Net Asset Value of the Fund and the Unit Price, the Trustee will follow the valuation policies and procedures adopted by the Fund. For the purpose of calculating the Net Asset Value of the Fund, the Trustee shall, and shall be entitled to, rely on, and will not be responsible for the accuracy of, financial data furnished to it by independent third party pricing services. The Trustee may also use and rely on industry standard financial models or other financial models approved by the directors of the Trustee in pricing any of the Fund's securities or other assets. If and to the extent that the directors of the Trustee are responsible for or otherwise involved in the pricing of any of the Fund's portfolio securities or other assets, the Trustee may accept, use and rely on such prices in determining the Net Asset Value of the Fund and shall not be liable to the Fund in so doing. It is intended that every trade settles in a cash position at the end of every trading day. No digital commodities are intended to be held overnight. … 8. ADDITIONAL INFORMATION 8.1 The Fund Constitution The Fund was established by a Constitution dated 2nd May 2018. The Constitution in respect of the Fund provides an operational framework for the ongoing management of the Fund. It sets out the rights, duties and obligations of the Trustee in respect of the Fund. The main operative provisions outlined in the Constitution include: applications, withdrawals, reinvestments and suspension of units rights of unit holders valuation of assets fees and expenses meetings of unit holders Trustee's power and indemnity limitation of liability termination of the Fund The Constitution also allows the Trustee to compulsorily redeem units and to stagger withdrawal requests. Holding units in the Fund does not give a unit holder the right to participate in the management or operation of the Fund. The Constitution provides for the issue of different Classes of units in the Fund to that detailed in this Information Memorandum. The Constitution is available by contacting the Trustee (refer to the contact details). The Trustee may amend the terms of or withdraw this Information Memorandum at any time, including alter fees, and may reissue a new or amended Information Memorandum from time to time. 8.2 Register of Unit Holders The register of unit holders is maintained by the Trustee. … 8.6 Reporting As an investor in the Fund, you will normally receive the following reports. Monthly Report A monthly report showing the Unit Price and the number of units owned by the unit holder will generally be made available to each investor. Tax, Distribution and Annual Statements Taxation and distribution statements are forwarded to all investors in respect of your distributions. In addition, an annual statement, which contains the transaction history of an investor for the year is also sent to all investors. … 9. DEFINITIONS Capitalised terms used in this Information Memorandum and the Fund's forms have the following defined meanings unless the context provides otherwise. … Constitution The deed establishing the Fund, dated 2nd May 2018 and as amended from time to time, and includes any supplementary deed Fund Digital Commodity Assets Fund … Net Asset Value or NAV The net asset value of the Fund, or Class of units in the Fund as the case may be, determined in accordance with the Constitution … Redemption Day First Business Day of February, May, August and November, subject to suspension and gate provisions. Deadline for completed redemption requests, being three (3) Business Days prior to a Redemption Day, and/or such other time or times as the Trustee may determine … Trustee DCA Capital Pty Ltd Unit Price Is the total Net Asset Value of the Class of units in the Fund divided by the total number of units in the Class Valuation Day the last day of each calendar month, and/or such other time or times as the Trustee may determine … JURISDICTIONAL ARGUMENT: LEGAL PRINCIPLES AND CONSIDERATION 1. At the hearing, Archener advanced a jurisdictional argument at the outset based on the so-called Graywinter principle, to the effect that the court has no jurisdiction to entertain the application to set aside the statutory demand made by DCA Capital in circumstances where the Balanian affidavit in support of the application failed to identify expressly or by necessary implication the grounds upon which that application was being made. 2. The Graywinter principle also formed the basis upon which Archener sought to exclude or limit the use of two central documents tendered as evidence by DCA Capital in the proceedings, being the Constitution and the March 2021 IM (the latter of which formed part of the exhibit to the Balanian affidavit). 3. The Graywinter principle has its origins in Sandberg J's observations in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; (1996) 21 ACSR 581 concerning the requirements under the statutory regime established by s 459G of the Corporations Act. 4. Section 459G of the Corporations Act provides: (1) A company may apply to the Court for an order setting aside a statutory demand served on the company. (2) An application may only be made within the statutory period after the demand is so served. (3) An application is made in accordance with this section only if, within that period: (a) an affidavit supporting the application is filed with the Court; and (b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company. 1. In Re ABA Villawood Place Pty Ltd [2023] NSWSC 952, Black J at [31] stated that the essential requirement of s 459G that the Graywinter principle emphasises is: …whether an affidavit in support of an application to set aside a creditor's statutory demand in fact supports that application … 1. The authorities concerning the Graywinter principle (which I will outline and discuss in greater depth below) indicate that the threshold requirement is: 1. a matter going to the court's jurisdiction to consider material filed beyond the statutory 21-day period; and 2. met where the affidavit filed with the court within the relevant period raises expressly, or by necessary or reasonably available inference, the existence of a genuine dispute. 1. The argument at the hearing canvassed relevant authorities, including at appellate level, addressing the scope and operation of the Graywinter principle. The principal authorities are addressed below. 2. In NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd (2010) 79 ACSR 544; [2010] NSWCA 210 (a decision to which I was referred by DCA Capital), the Court of Appeal of this court considered whether an affidavit in support of an application under s 459G in fact supported that application, in circumstances where the affidavit was directed to an offsetting claim but did serve to put in evidence the document (a facility agreement) upon which the debtor company ultimately wished to advance a particular construction, this being at the heart of the alleged dispute. After listing the many cases that had discussed the Graywinter principle (at [77]), Lindgren AJA (with whom Beazley JA and Handley AJA agreed) at [85] stated: … Whatever may be the outer limits of the concept of "supporting" in s 459G(3), in my view the requirement is met where, as here, the only issue sought to be raised by the company is one of construction within the four corners of the provision on which the statutory demand depends, and the document in question, albeit with other documents, is put into evidence by the affidavit filed and served within the 21-day period. 1. In Hopetoun Kembla Investment Pty Ltd v JPR Legal Pty Ltd (2011) 87 ACSR 1; [2011] NSWSC 1343, Ward J (as her Honour the President then was) at [35]–[36] and [38] said: 35 In Graywinter , Sundberg J said (at [587]): "In order to be a 'supporting affidavit', an affidavit must say something that promotes the Company's case ... The affidavit need not detail, in admissible form, all the evidence that supports the contention of genuine dispute ... The affidavit must...disclose facts showing there is a dispute between the parties. A mere assertion that there is a genuine dispute is not enough, nor is a bare claim that the debt is disputed sufficient. (my emphasis)" 36 There need not be an explicit articulation in the supporting affidavit of the ground(s) on which the application to set aside is to be raised, provided the ground is raised expressly or by necessary or a reasonably available inference (POS Media Online Ltd v B Family Pty Ltd [2003] NSWSC 147; (2003) 21 ACLC 533 per Austin J; Hansmar Investments Pty Ltd v Perpetual Trustee Ltd [2007] NSWSC 103; (2007) 61 ACSR 321 per White J). 37 Barrett J in Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143; (2007) 25 ACLC 1392, noting that what was required was that the grounds of objection be evident on the face of the affidavit, nevertheless considered that where the ground of challenge was a defect by reason of an omission from the creditor's accompanying affidavit, it would be sufficient if this omission was discernible on the face of a document annexed to the affidavit in support accompanying the statutory demand, even though attention had not been drawn to the point sought to be raised thereby (approving Callite Pty Ltd v Adams [2001] NSWSC 52, where an available inference from the documents annexed to the relevant affidavit that a particular ground of challenge had been raised was held to be sufficient). 38 Lindgren AJA in NA Investment Holdings Pty Limited v Perpetual Nominees Limited [2010] NSWCA 210 held that there is no requirement that the party seeking to set aside a statutory demand draw to the attention of the defendant the particular issue on which reliance will be sought to be placed (observing that such a submission confused the concept of "support" in the requirement for an affidavit in support with natural justice considerations). … 1. Sceam Construction Pty Ltd v Clyne (2021) 64 VR 404; [2021] VSCA 270 is a decision of the Victorian Court of Appeal constituted by Ferguson CJ, Sifris and Walker JJA. The facts in Sceam Construction involved a statutory demand issued to a construction company (Sceam) that had been engaged to carry out renovations at the defendants' home. That demand was issued after the renovation project collapsed. Sceam applied to the court, within time, to set the demand aside. The application was accompanied by an affidavit in support to which several documents were exhibited, including sections of the works contract between Sceam and the defendants. On appeal, the primary issue was whether the supporting affidavit was sufficient to support the application to set aside the statutory demand on the basis that there was a genuine dispute. 2. This was in circumstances where the alleged dispute, as disclosed by the affidavit filed with the application, centred on "defective design of the structure" by the architect (which the deponent pointed to as the reason for various problems encountered throughout construction). At the hearing at first instance, the dispute was otherwise characterised, said by Sceam to concern the validity of the contract's termination. 3. In their joint judgment, Ferguson CJ, Sifris and Walker JJA said at [38]: … [I]t is important to bear firmly in mind that what is critical is the language in the legislation. It requires an affidavit supporting the application to be filed with the Court within the statutory period. In the context of a claim to set aside the statutory demand on the basis that there is a genuine dispute as to the existence or amount of the demand, pursuant to s 459H(1)(a), the affidavit must support the application by providing the basis for establishing that there is a genuine dispute. Establishing the genuineness of the dispute requires material showing, or from which it can be inferred, that there is a real dispute. Most commonly this will be done by the deponent describing the dispute. That description will delineate the scope of the dispute which may be relied upon to set the demand aside. Where the dispute is based purely on the construction of a written agreement between the parties, the support requirement may be satisfied by exhibiting the agreement without more. But, for example and without being prescriptive, if something beyond the written terms is to be relied upon, then it is highly likely that this will need to be raised in the affidavit and more than mere assertion will be necessary. Ultimately, what is required to satisfy the support requirement must be assessed in the context of the particular application that is made. 1. At [49], their Honours noted: [The deponent] exhibited the coversheet, table of contents, pages containing statutory notices and a warning and the completed schedules to the contract. He did not include the pages containing the terms and conditions of the contract. He did not mention the letter of demand the solicitors for the [defendants] had served on Sceam, the subsequent notice of default, or the notice of termination. Nor did he exhibit those documents to his affidavit. 1. At [89], their Honours went on to say: Neither the notice of default nor the terms of the contract were referred to, let alone described, in the affidavit. Nor were they exhibited to the affidavit. While [the deponent's] affidavit stated that he "disagreed" with the asserted defects, nowhere in [that] affidavit did he raise any issue about whether the defects were a breach of a "substantial obligation" within the meaning of the contract. He did not describe them in any way that would have enabled a legal argument to be mounted that the defects did not constitute a breach of a substantial obligation. All that he did was make a number of assertions about five "problems" (all of which were directed to the design of the works and did not refer to any defects), record that he "disagreed" with all defects brought to Sceam's attention and state that he had disputed the debt from day one. 1. The court, finding that the affidavit and exhibited correspondence did little more than "repeat the language of the statute by saying that there was a dispute about [defects and incomplete works] and that that dispute was genuine" (at [91]), held that the affidavit was insufficient in that vital respect (at [88]). 2. In ABA Villawood Place, Black J referred to Hopetoun and Sceam with approval, stating at [31]: The balance of authority indicates that the principle raises a fact-specific inquiry as to whether an affidavit in support of an application to set aside a creditor's statutory demand in fact supports that application, and it will do so sufficiently if that dispute is raised expressly or is a reasonably available inference: Hopetoun Kembla Investment Pty Ltd v JPR Legal Pty Ltd (2011) 87 ACSR 1; [2011] NSWSC 1343 ("Hopetoun Kembla"). There are some cases where the principle has been treated as involving notice to the defendant of the relevant claim; however, in my view, that principle is ultimately based, not upon notice of the claim to a defendant, but upon the statutory requirement of s 459G of the Act that the claim in fact be raised within the 21-day period. … The provision [in s 459G] is a matter which goes to the Court's jurisdiction and not a matter involving any element of discretion on the Court's part. The scope of the principle has in turn been considered, at length, by the Court of Appeal of the Supreme Court of Victoria in Sceam Construction Pty Ltd v Clyne (2021) 64 VR 404; [2021] VSCA 270 at [11]ff, where the Court observed (at [38]) that what was critical was the legislative requirement that an affidavit support the application to be filed with the Court within the statutory period and (at [42]) that the question for the Court is whether the affidavit "supports" the application and, if it does, then the affidavit may be supplemented by evidence filed outside the statutory period and, if it does not, there is no jurisdiction to consider material filed beyond that period. 1. At the hearing, Archener sought to draw an analogy between the facts in Sceam and those at play in the present application. In connection with Archener's objection to the admission into evidence of the Constitution and the March 2021 IM, Archener highlighted that in Sceam Construction (as here), "some, but not all" parts of the documents governing the relationship between Sceam and defendants formed part of the material placed before the court (T12). In Sceam, the Victorian Court of Appeal found that what was included was not enough to support the application to set aside the statutory demand — the material neither demonstrated, nor provided a foundation for inferring, the existence of a dispute about the termination of the contract. For reasons that I have set out below, the same cannot be said of the Balanian affidavit and the material furnished by DCA Capital in this case. In my assessment, the analogy does not assist. 2. It was submitted by Archener that the Balanian affidavit makes no express reference to the operation of the Constitution and the March 2021 IM as the grounds upon which the debt is contested, and therefore in no way suggests that the basis of the alleged dispute concerns the nature of the rights held by Archener as a unitholder. 3. In Archener's submission, the contents of the Balanian affidavit and documents annexed to it all point to the identity of the trustee and/or the change in trustee of the DCA Fund as the ground for disputing the debt and are incapable of supporting a necessary or reasonable inference that the ground pressed by DCA Capital related to the rights and obligations of each of DCA Capital and Archener pursuant to the Constitution and March 2021 IM. In these circumstances, Archener asserts, the Graywinter principle is activated, and the court has no jurisdiction to consider the Constitution (it having been provided to Archener outside of the statutory 21-day period). Following a similar logic, a limiting order pursuant to s 136 of the Evidence Act 1995 (NSW) was sought in respect of the March 2021 IM, to limit its use to the purposes for which, on the face of the Balanian affidavit, it seemed originally to have been produced; that is, to buttress the change in trustee argument. 4. But on my assessment, having regard to the application of the principles contained in NA Investments, Hopetoun and Sceam (as approved in ABA Villawood Place), Archener must fail on the jurisdictional point. 5. I am satisfied that the Balanian affidavit contains material that by necessary or reasonably available inference did indicate that DCA Capital was challenging the statutory demand on the basis of the characterisation of Archener's rights as a holder of units in the DCA Fund for the following reasons: 1. In paragraph 9 of the Balanian affidavit, there is express reference to the March 2021 IM and to the Application Form completed and signed for Archener, both of which formed part of the exhibit to the Balanian affidavit. 2. The Application Form expressly states that it accompanies the March 2021 IM. 3. The investor declaration on the second-last page of the Application Form includes a term whereby the signatories "agree to be bound by the provisions of the Trust Deed governing the Fund and the terms and conditions of the IM". In all the circumstances, and in particular where there is no evidence that a separate trust deed for the DCA Fund ever existed, the reference to "the Trust Deed" must be read as referring to the Constitution. 4. The March 2021 IM exhibited to the Balanian affidavit makes repeated reference to the Constitution, including substantively in section 8 (extracted above). 5. To meet the jurisdictional requirement, it is not necessary for DCA Capital in the supporting affidavit to draw the attention of Archener to the particular issue on which reliance will be sought to be placed. 1. In my assessment, neither the March 2021 IM nor the Application Form are capable of being read without reference to the terms of the Constitution. That being so, and in circumstances where both Balanian affidavit and the material exhibited to it (all filed within the 21-day statutory period) expressly refer to and comprise the documents governing the relationship between the parties, the Graywinter principle does not apply so as to preclude the admission into evidence, or my consideration of, the March 2021 IM, the Application Form and the Constitution in this application. GENUINE DISPUTE: LEGAL PRINCIPLES AND CONSIDERATION Legal principles 1. Section 459H(1) of the Corporations Act is in the following terms: This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following: (a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates; (b) that the company has an offsetting claim. 1. In the recent decision of Re JDH Capital Pty Ltd [2024] NSWSC 164, Black J at [13]–[16] conveniently summarised the relevant principles governing the determination of an application to set aside a creditor's statutory demand under s 459H(1)(a) of the Corporations Act: 13 In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 (at 464); [1997] FCA 681, the Full Court of the Federal Court observed that a genuine dispute must be bona fide and truly exist in fact, and the grounds for the dispute must be real and not spurious, hypothetical, illusory or misconceived. The threshold to establish a genuine dispute is not high, and it is necessary to bear in mind the observations of Barrett J (as his Honour then was) in Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 (at [18]) that: "Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The Court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger." 14 I also have regard to the decision of the Court of Appeal in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 where, in summarising the case law applicable to offsetting claims, the Court of Appeal undertook a comprehensive review of the cases referable to establishing whether a genuine dispute was established. The Court emphasised (at [36]) that the evidence necessary for that purpose "need not conclusively prove or otherwise be incontrovertible or substantially non-contestable", and also observed (at [46]) that: "In determining whether there is evidence of a genuine dispute as to the debt, or that there is an offsetting claim, except in extreme cases, the Court is not concerned to engage in an inquiry as to the credit of the deponent of the affidavit filed in support of the application." The Court also emphasised (at [47]) that the Court's role was, in such an application: "… to determine whether there was plausible evidence to establish the existence of a genuine dispute, not whether the evidence was disputed or even likely to be accepted on a final hearing of any such claim." 15 In Ligon 158 Pty Ltd v Huber (2016) 117 ACSR 495; [2016] NSWCA 330 (at [8]), Barrett AJA in turn approved my observations in Re Wollongong Coal Ltd (2015) 110 ACSR 134; [2015] NSWSC 1680 (at [9]-[22]), that summarised the principles applicable to a genuine dispute as follows: "(1) A dispute is 'genuine' if it is not 'plainly vexatious or frivolous' or 'may have some substance' or "involves a plausible contention requiring investigation". A genuine dispute requires that it be bona fide and, to that effect, be premised on sufficiently particularised grounds that are "real and not spurious, hypothetical, illusory or misconceived" and which demonstrate the dispute's "objective existence" and "prima facie plausibility." (2) The test is governed by principles analogous to those which underpin an application for an interlocutory injunction or summary judgment. The court must, however, guard against setting the threshold too low for that is liable to defeat the legislative purpose of the section. (3) The task faced by a company challenging a statutory demand on the genuine dispute ground is by no means at all a difficult or demanding one. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow and the demand will be set aside. A finding to the contrary could only be arrived at if the contentions advanced are so devoid of substance that no further investigation is warranted. (4) The function of the court is merely to determine the existence of a genuine dispute. While this neither requires nor invites it to weigh or assess the merits of the dispute, the court will not exceed its legitimate function by having regard to evidence which bears upon whether the asserted dispute is genuine."' 16 A similar approach was adopted by the Court of Appeal in Creata (Aust) Pty Ltd v Faull (2017) 125 ACSR 212; [2017] NSWCA 300 and again by the Court of Appeal in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; [2019] NSWCA 60. I have drawn here on my summary of the applicable principles in Re PSR Refining Services Pty Ltd [2023] NSWSC 243 (at [16]ff). Where, as here, only part of the debt claimed is disputed, the Court must determine the "substantiated amount" under s 459H of the Act which, absent an offsetting claim, is the "admitted amount", as defined in s 459H(5) as, relevantly, so much of the debt as the Court is satisfied is not the subject of a genuine dispute. 1. The approach of the court to such an application, and especially to the issue of whether the dispute is genuine, was further elucidated in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330, where the Victorian Court of Appeal (comprising Kyrou, Ferguson and Kaye JJA) at [47]–[50] stated (citations omitted): 47 The terms of s 459H of the Corporations Act and the authorities make clear that, on an application to set aside a statutory demand, the applicant is required only to establish a genuine dispute or offsetting claim. The applicant is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. It is not necessary for the applicant to advance a fully evidenced claim. Therefore, the task faced by an applicant is by no means at all a difficult or demanding one. 48 In determining such an application, it is not necessary or appropriate for a court to engage in an in-depth examination or determination of the merits of the alleged dispute. This is because an application alleging a genuine dispute or offsetting claim is akin to one for an interlocutory injunction and requires the applicant to establish that there is a "plausible contention requiring investigation" of the existence of either a dispute as to the debt or an offsetting claim. It is therefore not helpful to perceive that one party is more likely than the other to succeed or that the eventual state of the account between the parties is more likely to be one result than another. Further, the determination of the "ultimate question" of the existence of the debt at a substantive hearing should not be compromised. 49 The court is required to determine whether the dispute or offsetting claim is "genuine". It has been said that the criterion of a "genuine" dispute requires that the dispute be bona fide and truly exist in fact and that the grounds for alleging the existence of a dispute be real and not spurious, hypothetical, illusory or misconceived. It has also been observed that the dispute or offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion. It must also have sufficient factual particularity to exclude the merely fanciful or futile. A rigorous curial approach is essential to the effective operation of the statutory scheme. 50 The court is not required to accept uncritically every statement in an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be, as it may not have sufficient prima facie plausibility to merit further investigation as to its truth. The court is also not required to accept uncritically a patently feeble legal argument or an assertion of facts unsupported by evidence, although this should not be read as suggesting that the applicant must formally or comprehensively evidence the basis of its dispute or off-setting claim. Except in such extreme cases, the court should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on by the applicant to set aside a statutory demand. Submissions of DCA Capital 1. DCA Capital submits that there is a genuine dispute as to both the existence of the debt and the amount of the debt. 2. As to the existence of the debt, DCA Capital's argument is as follows: 1. Clauses 1 and 2 of the Constitution make it clear that upon acceptance of the Application Form and the issuing of units in the DCA Fund as a unit trust of which DCA Capital was the trustee, Archener as a unitholder acquired units in the DCA Fund unit trust. Clause 2.1 of the Constitution provides that Archener as a unitholder holds a beneficial interest in the DCA Fund as a whole, divided into units, but not in any specific part or assets of the DCA Fund. 2. Archener was bound by the Constitution because it completed and signed the Application Form pursuant to the March 2021 IM that expressly refers to the Constitution and by doing so expressly agreed to be bound by the provisions of the Trust Deed governing the DCA Fund and the terms and conditions of the March 2021 IM. The Trust Deed governing the DCA Fund is the Constitution. 3. Clauses 2.29–2.45 of the Constitution provide for the withdrawal of units (section 4.2 of the March 2021 IM calls this the 'redemption' of units) and create a procedure by which that may occur. 4. The rights of Archener as a beneficiary of the DCA Fund against DCA Capital as trustee for trust income are generally enforceable in equity only and do not create a debtor-creditor relationship, citing Euroasian Holdings Pty Ltd v Ron Diamond Plumbing Pty Ltd (in liq) (1996) 64 FCR 147; 19 ACSR 234, per Heerey J. 5. The withdrawal/redemption of units in the DCA Fund unit trust is analogous to the principle in Euroasian because under the Constitution and the March 2021 IM the duties, powers and discretions of the trustee and the correlative rights and powers of the beneficiaries are only enforceable in equity. 6. Archener cannot be a creditor and DCA Capital cannot be a debtor because the rights of Archener are only equitable. 7. As a result, there is a genuine dispute between Archener and DCA Capital over the existence of the debt, and the use of the statutory demand procedure in s 459E of the Corporations Act is misconceived. 1. DCA Capital also submits that there is a genuine dispute about the amount of the debt, which is claimed by Archener to be $996,407.30 (including GST). DCA Capital says that section 4.2 of the March 2021 IM explains the mechanics of redeeming units in the DCA Fund and outlines a formula for the calculation of the redemption price for a unit in the DCA Fund which depends on: 1. the calculation of a "Unit Price" on the "Valuation Day", prior to the "Redemption Day" where: 2. the "Unit Price" is defined as the "total Net Asset Value of the Class of units in the Fund divided by the total number of units in the Class"; 3. "Net Asset Value" is to be determined in accordance with the Constitution; 4. "Valuation Day" is defined as the last day of each calendar month or such other time(s) as the trustee may determine; and 5. "Redemption Day" is defined as the first business day of each quarter with February, May, August and November being designated as quarters. 1. According to DCA Capital, the amount of the debt in dispute is simply not known because: 1. Archener has failed to articulate properly or at all the basis upon which it has calculated the redemption value of its units in the DCA Fund; 2. there is no evidence before the court as to the total number of units Archener holds in the DCA Fund; 3. there is no evidence before the court as to the total Net Asset Value of the Class of units in the Fund and the "total number of units in the Class", information which is central to determining the "Unit Price"; 4. there is no evidence before the court as to the unit price of the units that Archener held at the time of the "Valuation Day", whatever day that may be or might have been; 5. the Constitution and not the March 2021 IM provide for the redemption of units in the DCA Fund; and 6. all or part of an investment may be lost at any time or fail to provide a return on account of the speculative and volatile nature of the business of the DCA Fund. 1. DCA Capital says that there are cases in which courts have found that entry of amounts in the accounts of a trust, as due to a beneficiary, in the particular circumstances, amounted to an admission that the amount was due and payable, referring to In the matter of Norwest Legal Services Pty Ltd [2019] NSWSC 1896, Black J at [10], citing Chianti Pty Ltd v Leume Pty Ltd [2007] WASC 270 at [77] and Gustode Pty Ltd v Ashley [2011] FCA 250. DCA Capital says there is no analogous evidence before the court in this case that the amount of $996,407.30 as claimed in the statutory demand is, in fact, due and payable as an acknowledgement or an admission. Submissions of Archener 1. Archener's submissions in response are succinct. DCA Capital has failed to meet its burden of proof and evidentiary onus to place before the court material which would demonstrate that there is a genuine dispute about the existence and the amount of the debt. Archener does not have an onus to adduce evidence to contradict itself. Archener's statutory demand has been prepared based on information available to it which has not been challenged in an evidentiary way by DCA Capital. 2. Archener says that there is no genuine dispute in this case because Mr Balanian has given evidence that he has access to the books and records of DCA Capital and DCA Fund but has failed to put on evidence of such of them as are germane to the dispute, particularly for the calculation of the amount of the debt. All that DCA Capital has done on this application is raise hypothetical grounds for alleging the existence of a dispute which could never "have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion" in the sense described in Malec. Consideration 1. I agree with the submissions that have been made by Archener. 2. The rights which attach to a unit in a unit trust do not equate to those of a share in a company. In Charles v Federal Commissioner of Taxation (1954) 90 CLR 598, Dixon CJ, Kitto and Taylor JJ at 609 said (in a taxation context): … a unit held under this trust deed is fundamentally different from a share in a company. A share confers upon the holder no legal or equitable interest in the assets of the company; it is a separate piece of property; and if a portion of the company's assets is distributed among the shareholders the question whether it comes to them as income or as capital depends upon whether the corpus of their property (their shares) remains intact despite the distribution: Inland Revenue Commissioners v Reid's Trustees (1949) AC, at p 373. But a unit under the trust deed before us confers a proprietary interest in all the property which for the time being is subject to the trust of the deed: Baker v Archer-Shee (1927) AC 844; so that the question whether moneys distributed to unit holders under the trust form part of their income or of their capital must be answered by considering the character of those moneys in the hands of the trustees before the distribution is made. 1. It is clear that the rights held by a unitholder who holds units in unit trust are to be determined by reference to the terms of the trust deed under which it is established, not in the abstract. In ElecNet (Aust) Pty Ltd v Federal Commissioner of Taxation (2016) 259 CLR 73; [2016] HCA 51, Kiefel, Gageler, Keane and Gordon JJ at [50] said (again in a taxation context; footnote omitted): It must be understood, however, that, in CPT Custodian, this Court was concerned with a question as to the ownership of the assets of a trust estate of a unit trust. That question could not be answered by reference to the characteristics of a "unit trust" considered in the abstract. Rather, in order to determine the nature of the interests of unitholders, "it was necessary to begin with the terms of the relevant trust deeds and the rights, powers, and restrictions for which they provided." It was held that the nature of a beneficiary's rights under what was described as a "unit trust" was not determined by that general designation, but by the operative terms of the instrument. … 1. In this case, those rights are primarily governed by the Constitution. Clause 2.1 of the Constitution provides that each unitholder has a beneficial interest in the DCA Fund but not in any specific part or assets of DCA Fund. But that is not the end of the required analysis for the purposes of this application. 2. To determine the rights of Archener and how they should be characterised, it is also necessary to consider the provisions of the Constitution concerning withdrawals, as a result of Archener having submitted the Redemption Request Forms to DCA Capital in March 2023. Once that occurred, in accordance with cl 2.35 of the Constitution, it was incumbent on DCA Capital, within 21 days of the "Valuation Time" on which the unit price of the "Units" is (or was) determined in accordance with cl 2.36, to cause the redemption of Archener's interest in the DCA Fund as equals the amount of the withdrawal. 3. For reasons which will become readily apparent from the operation of cl 2.36 of the Constitution, Archener would have no way of knowing that precise amount without being provided with information known only to DCA Capital. 4. This is because the determination of the unit price of a "Unit" of a "Class" requires the calculation of a range of integers under cl 2.36, most of which then reference numerous defined terms contained in cl 16.1 of the Constitution, being: 1. The "Value" of that "Class", where the "Value" is defined to mean the "Value" of the "Assets" allocated to the "Units" of the "Class" less the "Liabilities" allocated to "Units" of the "Class" less "Transaction Costs" expressed on a per unit basis, the result being rounded down to the next 100th of a cent calculated as at the next Valuation Time after receipt of the valuation request, as determined by the Responsible Entity in accordance with and subject to cl 2.38, which requires: 1. use of the "Value, in relation to an Asset" definition, meaning the "Value" of the "Asset" as determined in accordance with the Responsible Entity's valuation methods and policies in cl 3.4 (which in turn uses the definition of "Asset", meaning any property held by on behalf the Responsible Entity on trust for the Unitholders and includes any income accruing on and rights relating to that property); 2. use of the "Liabilities" (in relation to the Value of a Class or the Trust) definition, meaning all present liabilities of the Class or the Trust (as applicable), including all taxes, liabilities accrued but not yet paid, borrowings, unpaid costs, charges, expenses, outgoings, fees, contingent liabilities, unpaid amounts due to a Unitholder, unpaid remuneration due to the Responsible Entity and any provision which the Responsible Entity decides should be taken into account in determining the liabilities of the Class or the Trust (as applicable); and 3. use of the "Transaction Costs" definition which, for the "Withdrawal Price for Units", is calculated in accordance with clause 2.36 (which may be calculated as a percentage of the Value of the Class) calculated and fixed by the Responsible Entity from time to time to represent the Responsible Entity's estimate of the total Expenses that would be incurred to sell the Assets on that date, provided that in connection with any particular Withdrawal Request and subject to the Corporations Act 2001, the Responsible Entity may determine a reasonable estimate of the actual amount necessary to avoid an adverse impact on other Unitholders due to the acquisition or disposal of Assets carried out because of a particular Withdrawal Request. 1. The division of the amount arrived at in (1) by the number of "Units" of that "Class" on issue. 1. Yet, DCA Capital comes to court to say that it genuinely disputes the debt in the statutory demand without any of this detailed information from its own books and records, to which Mr Balanian of DCA Capital has direct access. DCA Capital provides no evidence of: 1. what steps (if any) it has taken upon receipt of the Redemption Request Forms; 2. what calculations (if any) it has made under cl 2.36 (using the tortured and lengthy defined terms) to calculate the amount of the withdrawal made by Archener; and 3. what entries (if any) it has made in its accounts as being due to Archener under cl 2.36 upon receipt of the Redemption Request Forms. 1. DCA Capital has the onus of proof and the evidentiary burden on this application to make out its case that there is a genuine dispute as to the existence or the amount of the debt. But it has not favoured me with the very evidence that goes to the very heart of those matters. It leaves me without any evidence of what has been done by DCA Capital on receipt of the Redemption Request Forms. Those matters are peculiarly within its knowledge, yet it says that Archener has failed to prove those matters. That is an erroneous reversal of the onus of proof in this application, which rests with DCA Capital. 2. To my mind, the failure of DCA Capital to do anything other than assert without evidence that there is a genuine dispute falls short of the requirements of s 459H(1) of the Corporations Act and the principles that have been developed relating to the application of that provision. In reaching this conclusion, I am conscious, from the guidance in Wollongong Coal (as approved in Ligon 158) that while the relevant test to be applied is not a difficult or demanding one, it should not be set so low as to defeat the legislative purpose of s 459H(1). It was not difficult or demanding for DCA Capital to provide the evidentiary support required to demonstrate the genuineness of any dispute, but it has not done so. ORDERS 1. For the reasons stated above, I propose to make the following orders: 1. The originating process filed 27 November 2023 is dismissed. 2. The plaintiff is to pay the costs of the defendant. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 March 2024