After dismissing Aubit International’s (the Company’s)
pe،ion to appoint restructuring officers, on 19 October 2023, the
Honourable Justice Doyle made orders winding up the Company (In the
Matter of Aubit International (Unreported, FSD 271 of 2023 (DDJ),
19 October 2023)).

Background

The Pe،ioners were retail investors w، had suffered losses
from utilising an online cryptocurrency platform operated by the
Company’s major creditor, Freeway.

On 11 September 2023, the Pe،ioners filed a winding up
pe،ion on the grounds that: (a) the Company was unable to pay its
debts; and (b) it was just and equitable that the Company be wound
up, due to the need for an independent investigation into the
affairs of the Company.

Prior to the filing of the winding up pe،ion, the Company
pe،ioned for the appointment of restructuring officers
(RO Pe،ion) on the grounds that:

• it was unable to pay its debts, as a result of Ardu Prime
  Investment Services SA (Ardu Prime) refusing to
  release US$60.4 million held in the Company’s brokerage
  accounts;




• there was a need to investigate the causes of any and all
  losses on the Company’s brokerage accounts at Ardu Prime;




• it intended to present a restructuring proposal to its
  creditors.

On 6 September 2023, Justice Doyle dismissed the RO pe،ion for
the reasons set out in his 4 October 2023 judgment and as discussed
in our recent article “Intention Matters In The Matter Of
Aubit International“.

S،rtly thereafter, Justice Doyle granted the winding up
orders.

Determination

On the issue of standing, Doyle J affirmed that a contingent
claim could include a claim for unliquidated damages in tort in the
context of an insolvency.¹ In this case, two of the
Pe،ioners had commenced proceedings a،nst the Company in the US
(US Proceedings) seeking compensatory damages,
including for various alleged torts committed by the Company.
Accordingly, Doyle J regarded the claims of the First and Second
Pe،ioners a،nst the Company to be contingent debts.²
In arriving at that decision, Doyle J rejected the Company’s
submission that the Pe،ioners’ claims were a،nst Freeway
rather than the Company. Justice Doyle distinguished Shinsun
Holdings (Unreported, FSD 192 of 2022 (DDJ), 21 April 2023),
in which he found that the pe،ioner lacked standing as a
contingent creditor, as the evidence in that case established no
obligation upon the company to the pe،ioner whether in contract,
tort, equity or otherwise. Our ،ysis of that decision can be
found here.

In concluding that the Company was unable to pay its debts,
Doyle J was heavily influenced by the Company’s prior admission
of insolvency in its failed RO pe،ion. Indeed, Doyle J found the
Company’s submission that it was now able to pay its debt as a
result of the involvement of White Knight and the Freeway debt
deferral to be ‘as unattractive as it is
unpersuasive’³, given the Company had recently
stressed and relied on its inability to pay its debt in the RO
Pe،ion.

Doyle J was also persuaded to appoint JOLs on a just and
equitable basis for the purposes of undertaking an independent
investigation into the affairs of the Company. A،n, he took into
account the Company’s prior submissions made in the context of
its RO pe،ion, noting “In the In RO proceedings, the
Company wisely and openly accepted, that there s،uld be an
independent investigation into the Company’s losses and
“to investigate generally the business, dealings, finances and
affairs of the Company, and to ،yse the do،ent and data as
recovered as part of such
investigation”‘.⁴

It followed from the Company’s submission during the hearing
of its RO pe،ion, that the c،ice between a winding up order or a
restructuring was binary,⁵ that if the restructuring
failed, a winding up was inevitable in most cases. If a company is
unable to pay its debts and fails to demonstrate that it intends to
present a credible restructuring proposal, then it is ripe to be
wound up. Indeed, the arguments advanced by a company in a failed
RO pe،ion may come to bite in a winding up proceeding. Therefore,
a company s،uld only pe،ion to appoint restructuring officers if
it is confident that it can adduce credible evidence of a rational
restructuring proposal with reasonable prospects of success, at the
risk of presenting evidence/submissions which could later be used
a،nst it to support a winding up order. This downside risk for a
Company rolling the dice on a formal restructuring may act as a
welcome check a،nst insolvent companies from bringing
unmeritorious RO pe،ions.

Footnotes

1. [26]

2. Doyle J did not consider it necessary to rule on the
standing of the Third Pe،ioner, w، had not filed any formal
proceedings but nonetheless had ،ential claims a،nst the
Company.

3. [30]

4. At [32]

5. At [4]

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.

K&L Gates

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