Cayman lawyers fight to dislodge Hall Chadwick

Later this year the Federal Court will be asked to determine whether the Hall Chadwick quartette of Brent Kijurina, Cameron Shaw, Aaron Dominish and Richard Albarran should be replaced as liquidators of Probis Financial Services Pty Ltd (Probis) on the basis of bias.

The application was commenced in February by Probis’s largest creditor, Harneys Trusts (Cayman) Limited (Harneys) as trustee for the Longchamp Absolute Return Unit Trust Fund (Trustee).

Harneys was one of the largest investors in Probis, which traded in contracts-for-difference, foreign exchange and other derivate financial products until the middle of last year when it suddenly appointed the Hall Chadwick quad as VAs on July 17, 2023.

According to Harneys’ Concise Statement, prior to the referral to Hall Chadwick in June 2023, Probis’s controllers novated its obligations to two other investors – AI Quantum and JY SPC – to a New Zealand entity, Mars Cap Limited by way of “Account Balance Transfer Deeds”.

The deeds were prepared by law firm O’Loughlin Westhoff. Lawyer Jonathan O’Loughlin is also acting for the liquidators as they defend the replacement proceedings.

Mars Cap meanwhile is also now in liquidation and at the centre of a global hunt for up to $6 billion in missing funds. But back to the bias.

The Hall Chadwick quad appear to have gotten under Harney’s skin early on in the administration by not giving notice to the Probis Committee of Inspection (COI) that they were applying to the NSW Supreme Court for orders to extend the convening period for the second meeting of creditors.

The court granted the extension in August, the same month ASIC suspended Probis’s financial services license on the basis that the company had entered into external administration.

Then, in their report to creditors in advance of the second meeting on November 22, the VAs advised that they intended to “unilaterally adjourn the second creditors’ meeting, on the ground
that several DOCA proposals were expected to be forthcoming”.

Harneys claims there was material deficiencies in the report to creditors, a claim the VAs have denied, pointing out in their reply that the meeting date fell while they were mid-way through a sale process.

Writing to the VAs ahead of the meeting Harneys offered to subordinate its claim to various identified claims admitted to proof in the liquidation of Probis and said the second meeting should not be adjourned and Probis should instead enter liquidation immediately. It was in this correspondence that Harneys indicated that it would seek to ditch the Hall Chadwick four.

Despite the correspondence Albarran adjourned the meeting immediately on opening on November 22.

When the second meeting was held on January 29 the VAs recommended creditors vote in favour of a DoCA proposal.

Harneys, which had $125 million or 99.8 per cent of the total debts voted against it. Albarran as meeting chairman used his casting vote to push it through. Unfortunately for the VAs, ASIC cancelled Probis’s AFSL two days later, prompting the proponent to pull the deed and forcing the company into liquidation.

A couple of weeks later Harneys commenced the proceedings, seeking orders from the court for the replacement of the Hall Chadwick four with BDO’s Andrew Sallway, Duncan Clubb and Jeffrey
Marsden.

In their reply the liquidators alleged that Harneys commenced the proceedings for an improper purpose, namely that it was seeking to stifle the liquidators’ investigation into more than $20 million in potential unfair preferences paid to Harneys in the six months prior to their appointment as VAs.

Further, the liquidators are investigating Harneys’ involvement in respect of persons implicated in the scheme and have raised potential independence issues with the appointment of Sallway, Club and Marsden given that BDO Cayman Ltd was the appointed auditor of JY SPC and BDO New Zealand Ltd “provided tax advice to JY Quant in respect of the incorporation of Mars Cap; and was Mars Cap’s appointed accountant at all relevant times”.

Harneys said that the improper purpose allegation simply strengthened its argument that the liquidators could not be seen to be able to conduct the administration of the company in a way that wouldn’t create the apprehension of bias. The matter is set down for hearing for three days in September.