Dubber Corporation (ASX: DUB), a Melbourne-based software company that saw $26.6 million go missing from its books in early 2024, has filed legal proceedings against its former auditor BDO Audit (WA) over the incident that sparked an ASIC investigation and the sacking of co-founder Stephen McGovern.
Last year an audit of Dubber's half-yearly accounts showed the funds held in a term deposit on behalf of the company by third-party trustee Christopher William Legal, representing close to half of $60 million deposited between mid-2019 and August 2021, were no longer available.
A trust account ledger provided by the law firm showed many unauthorised transfers in and out of the account, which was unknown to the company until 27 February 2024.
Late last year the company raised $25 million to help fill the financial black hole with the proceeds going towards a mix of working capital, activities to reduce tax liabilities, and supporting efforts to claw back the missing $26.6 million which Dubber alleges was misappropriated.
As a "major step" in its recovery action, today the group's subsidiary Dubber Pty Ltd filed proceedings against BDO Audit (WA) Pty with a claim for $26.6 million plus interests and costs.
Dubber Pty Ltd alleges that BDO Audit (WA) was negligent in the performance of audits in FY20, FY21 and FY22, and that alternatively it engaged in misleading and deceptive conduct by failing to perform its duties.
"It asserts that, but for that conduct, it would not have suffered the loss that it did as the known parties would have been unable to misappropriate the funds or otherwise the funds would have been partly or wholly recovered," Dubber said in a statement to the ASX today.
The company expects the matter to be heard for a trial in 2026.
Dubber claims the respondents' lawyers have denied any liability. A spokesperson for BDO declined a request for comment.
"Whilst the Company will pursue the claim vigorously it should be noted that all litigation is inherently risky, and the outcome is uncertain," Dubber added.
"Further and separate proceedings will be issued shortly against the known parties and in some cases against their associated professional bodies and insurers seeking restoration of misappropriated funds and associated interest and costs.
"A further major commercial contract claim is also likely. Again, there can be no certainty as to the outcome of any proceedings or the quantum of any recoveries."
Dubber shares are up 11.76 per cent this afternoon at 1.9 cents - far below the 3.8 cents level before it advised in May that the company had received verbal confirmation from VirginMedia O2 (VMO2) in the UK that it would not be renewing an existing call recording and wholesale SIP (session initiation protocol) services agreement.
The confirmation from VMO2 came after Dubber heard it through the grapevine first, leading the group to announce an anticipated material negative impact of $7 million on its gross margin.
Shares fell significantly after that, but around two weeks later Dubber reported that VMO2 would still retain its wholesale SIP contract with Dubber, although this only generates $550,000-750,000 annually.
"In light of the net impact of the impending revenue reduction with VMO2 the Dubber management team has taken all necessary steps to mitigate any bottom-line impact," Dubber reported earlier this month.
"With Board support the team is implementing a further cost reduction programme to reduce costs by approximately $4 million per annum by 30 June 2025, with the benefits to be realised across the first half of FY26 year with little to no impact on our growth and product development activities.
The group also plans to exit an unfitted real estate lease in London to save $1.25 million a year, and has two interested parties.
"The Company reported that it has $16.5 million of available working capital as at 31 March 2025. The balance sheet remains in a strong position after the actions referred to above and the company anticipates having available working capital of at least $12 million based on achieving run-rate cash flow positive," Dubber stated.
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