Wednesday, 13 November 2013

Zeptonics insolvency

Zeptonics and the other corporate respondents went into the liquidator's hands last week as ordered by the Federal Court of Australia, Honourable Justice Jennifer Davies presiding.

I obviously disagree with the decision and am somewhat aggrieved.  Zomojo and Exablaze no doubt believe the decision just.  According to the the court, it is indeed just.  We lost.

All we can do is respect the court's decision and move on though I'd like to describe a little of my unhappiness by sharing a small part of the tale.  Obviously I'm a little biased and view the whole episode though my own rose coloured glasses. I remain particularly surprised that Gordon J awarded millions of dollars of my shares to Zomojo without hearing our evidence.

It's been particularly difficult on the immediate family but we're lucky to live in a caring extended family environment.  We have also received many kind words from the technically and business savvy community that recognised Zeptonics' truth. The family is getting better with my wife and three daughters state of mind improving with continued counselling. Still, though we have no home, and even my wife's twenty years of superannuation from high school teaching was also taken by the court, we are fortunate to be able to live with in-laws in their house and get generous support from my family. My retired parents spent most of the year in Sydney in their Winnebago helping work through the difficult drama. A daughter's self harm episodes and round the clock hospital watches reminds you of what is really important and that we need to contain the bitterness and move on. However, I must also remember that just because I'm paranoid doesn't mean they're not out to get me.

Firstly, the bizarre. I believed Zomojo (which owns or is Exablaze) had no proper standing as a creditor as it had no debt that could be paid, even if Zeptonics wanted to. Zomojo only a minor informal debt with no statutory demand that was likely to be around 20k after eventual taxation by the court. Zomojo applied to put the company into insolvency though Zeptonics had more than $200,000 in cash in its accounts with additional monies due. There was a live possibility that Zomojo instead of being owed 20k overall could have owed Zeptonics monies (potentially around a million dollars in costs on the upper side of that profile) due to the formal offers of compromise in place on the contempt and main trial. I am reliably informed by one Australian Law textbook chapter author that their insolvency chapter will now need to be rewritten as the court is always right and their standard text does not represent the court's decision.

I do have some further interesting facts to illuminate. Well, interesting to me. A registrar, Registrar Pringle, was scheduled to hear the insolvency. Registrar Pringle elected not to hear it as he quite wisely and correctly expected it to be contentious.  He then, somewhat unusually, asked us to suggest a Judge and place to hear it. Although Marshall J had ruled against us in the past, His Honour certainly is a decent, smart and empathetic fellow so we asked for His Honour to preside and preferred Tasmania as the place as this was where the remnants of the companies existed and Marshall J was known to visit there. It didn't happen.

We received Davies J as the docket judge in Melbourne. Davies J was a newly minted judge in the Federal Court of Australia. We knew we were up against it as I had previously sought to have Gordon J recused and Her Honour did indeed withdraw without providing a reason. Now Davies J works with Gordon J, not just in the same Melbourne University Law School but in the same tax department. I perceived there was potential for some bias, regardless of the good nature and standing of Davies J, due to my criticism of Gordon J.

The whole thing got a fair bit stranger though.

There was no leave yet granted to pursue the insolvency but Registrar Burns allowed some subpoenas to be issued to a variety of parties. One interesting subpoena was to GPC our main manufacturer. At the time the Joshua Rose left us and arrived at Exablaze they were considered a potential creditor. Indeed, at the time Mr Rose left, GPC was somewhat confused as they worked through the accounts and indeed thought themselves to be a creditor. Joshua Rose was gone after the GPC accounts were sorted out. GPC and Zeptonics had agreed GPC was a debtor, not a creditor, and the balance was paid to us. I don't know why Zomojo subpoenaed GPC, nor why Registrar Burns allowed it, given Joshua Rose had a confidentiality agreement and there was nothing else to suggest GPC were a creditor and GPC were indeed a debtor.

The actions of Registrar Burns seemed somewhat unusual to my untrained eye. You’d think there would have to be a reason to issue subpoenas especially before leave to pursue the insolvency had been granted. Registrar Burns allowed five subpoenas, including to GPC, on 16 Sep. Registrar Burns made orders regarding subpoenas on 25 Sep, 27 Sep, 30 Sep and on 2 Oct, the day after the one day trial before Davies J. On 2 October 2013 Registrar Burns withdraw from deliberations of a party asking for subpoena related costs from Zomojo as Registrar Burns declared an association with Zomojo and Exablaze Chairman & Director, Dr Greg Robinson.  Interestingly Registrar Burns only saw himself as conflicted some of the time. Registrar Allaway stepped in for Registrar Burns and awarded costs to the party against Zomojo.

This is the same Dr Robinson who had donated at least $200,000 to Melbourne University where Davies J works as an academic. Dr Robinson’s wife, Professor Patricia Desmond, also works at the University of Melbourne.

It seemed pretty obvious to me that the companies were solvent but I feared the bias that I claimed may have been apprehended by a reasonable lay person in Gordon J’s conduct would continue in this proceeding.

Registrar Burns certainly made me think about other interactions with the Victoria Registry in a different light. We hadn't had much luck but largely professional interactions with the Registry. Registrar Hetyey, for example, worked through a number of mediation sessions for us that didn't go well but we certainly appreciated his professionalism and integrity. It is a shame the actions of Registrar Burns leaves us with mixed feelings about the Registry.

Davies J found the the companies to be insolvent. You may read the judgment yourself and apprise yourself of the quality of the judgment as I believe it speaks for itself. Davies J considered the inter-company loans that were used for capital management, in lieu of issuing securities, to be due and payable though there was no evidence put forward that they were. The findings of fact declared by Davies J made any appeal problematic but it still seemed surprising to myself that the companies could be deemed insolvent and that the process was not an abuse.

We had a hearing about an appeal before Murphy J. I don’t believe the fact that Murphy J works at Melbourne University had an influence. Murphy J tossed and turned a little in the chair and indeed described his wavering as the argument unfolded. His Honour declared he saw a weak case for an appeal but insisted on us providing security from funds outside the companies to cover the other sides costs which we could not do. We could fund our own legal bills but not Zomojo's as well. We could not proceed.

Zomojo had the benefit of holding the millions of dollars of my shares Gordon J awarded to them without hearing the evidence.  I had limited funds.  The court said simply, not enough money, no appeal.

Zomojo's Dr Greg Robinson lied and misled the court in the past (for example, VID 1478/2011 Exhibit-11, transcript P-94 to P-101) and this has had no bearing on credit.

The Zeptonics Respondents with excess cash, no bills of a form payable to the applicant it could even pay, and a surplus of funds beyond Zomojo’s claims, were put into the hands of the liquidator. The practical effect being that the Respondents in the main case would not be able to effectively continue and there would be no appeal by those Respondents and this was not deemed to be an abuse of process by the court.

The real tragedies though, are personal ones. There were great and innovative products that were all built from the ground up by dedicated, hard working staff with visionary seed investors funding the dream. More than seven million dollars was poured into the development. Early customer demand from some very smart customers the world over grew into a significant order pipeline that proved the products. The staff and investors had indeed built a company into an embryonic success and were duly rewarded with employment terminations and confiscation of assets caused by Gordon J's orders. Order pipeline dead. Australia was deprived of a high technology concern. The country really needed such a breakthrough onto the world stage. The individual stories of sacrifice, dedication, hard work and supremely creative innovation in establishing a variety of important world firsts are the tragically unfair stories. The customers were dudded. Good staff and good investors, all great people, were harmed.

Perhaps it is time to seek asylum in Afghanistan.

--Matt.





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PS:  The unsung heroes were the legal fraternity that fought the good fight on our behalf despite the challenges and budget limitations.  They kept sane in face of poor behaviour of the other side.  Many went above and beyond the call of duty, working long stretches, sacrificing fees and providing an empathetic shoulder along with wise counsel.  Many executed flawlessly, some things perhaps could have been better, that is always the case, but the ultimate failure was not theirs.


Friday, 8 November 2013

Attack of the trash

Interesting.

A co-ordinated attack over ssh with the user "trash" on servers here today.  I always get lots of "root" door knocks but this "trash" attack was kind of notable in its global breadth.

Nov  8 14:31:07  Failed password for invalid user trash from 176.31.72.71 port 33242 ssh2
Nov  8 16:37:55  Failed password for invalid user trash from 12.35.78.40 port 46764 ssh2
Nov  8 17:00:46  Failed password for invalid user trash from 62.149.196.28 port 55839 ssh2
Nov  8 17:26:56  Failed password for invalid user trash from 109.196.34.51 port 57956 ssh2
Nov  8 18:50:59 Failed password for invalid user trash from 88.208.247.41 port 40254 ssh2
Nov  8 19:02:33 Failed password for invalid user trash from 216.58.130.126 port 55127 ssh2

176.31.72.71 is KeyRipe01 from OVH ISP in France
12.35 is the AT&T in the US.  Wide net with PLX Technology being behind 12.35.78.0/26
62.149.196.28 is Aruba S.p.A in Italy
109.196.34.51 is FUZ Adam Rojek from Poland
88.208.247.41 is FastHosts in the UK
216.58.130.126 is ViaWest in CO in the US

Sounds like a bunch of infected machines.  I am wondering what the trash attack is about.  Any one know the basis for the attack?

--Matt.