The Federal Court has today determined that former ASX-listed technology company GetSwift and three of its directors breached multiple sections of the Corporations Act (2001) and failed to discharge directors’ duties, bringing to conclusion a long-running legal bout between the two parties.
While the Court has deferred on making orders, today’s judgment from Justice Lee details how, on a number of occasions, GetSwift and directors Bane Hunter and Joel Macdonald alongside non-executive director and the company’s general counsel Brett Eagle knowingly failed to inform the ASX of information material to the company’s business.
In his 859-page judgment, Justice Lee determined there was a “plethora” of evidence revealing the company’s and its directors’ efforts to strategically time the release of ASX statements, and that they orchestrated a “public relations-driven approach” to corporate disclosure.
Justice Lee notes how this approach sent the share price in the now Canada-domiciled company to rise significantly from its $0.20 per share listing price in December 2016 to more than $4 per share a year later.
Ultimately, GetSwift’s share price fell by 90 per cent from an all time high of $4.30 on 4 December to just $0.52 per share, leading to the Australian Securities and Investment Commission (ASIC) opening an investigation into the company and ultimately taking the matter to court.
“It is notable that GetSwift, which might be aptly described as an early-stage tech company, was able to generate such significant momentum and interest in its share price at a time when the company had incurred historic operating losses to date,” Justice Lee said.
“This is especially so in circumstances where potential investors would likely face some difficulties in assessing the true value of GetSwift shares due to the absence of any successful track record and its limited operating history.”
Justice Lee said it was clear what was going on behind closed doors at the software as a service (SaaS) business.
“Despite the skilful submissions made on behalf of the defendants, a close review of the contemporaneous record reveals with clarity…what went on a GetSwift,” Justice Lee said.
“At the risk of over-generalisation, what follows reveals what might be described as a public relations-driven approach to corporate disclosure…motivated by a desire to make regular announcements of successfully entered into agreements with a number of national and multinational enterprise clients.
“There was a plethora of documentary evidence in the form of emails exchanged between some of the directors revealing efforts directed at the strategic timing of ASX announcements, making sure the announcements were marked as price sensitive, orchestrating simultaneous media coverage and evincing an appreciation the failure to release announcements of new clients agreements could have a negative impact on investor expectations.”
The Federal Court Justice also noted how Hunter sought total control over the release of ASX announcements, describing his approach to dealing with his staff, which were admonished one time after releasing a statement to the market without the director’s permission, as “demanding”, “forceful” and “rude”.
“As will be seen from the numerous communications, liberally sprinkled with capitalised words and reproduced below, Mr Hunter displayed a management style that is littered with the influence of the late Dale Carnegie,” Justice Lee said.
“He was demanding, forceful…to the point of rudeness.”
As such, Justice Lee made a number of conclusions, detailed below.
- With regard to GetSwift, Justice Lee found the company contravened Section 674 of the Corporations Act, that being the disclosure requirement, on 22 occasions. The company also breached Section 1041H on 40 occasions, that being the misleading or deceptive conduct part of the Act.
- Hunter was found to have breached the disclosure requirement 16 times, the misleading or deceptive conduct law 29 times, and also failed to exercise his powers and discharge his duties as a direct with the degree of care and diligence required in the Corporations Act.
- McDonald was found to have breached the disclosure requirement 20 times, the misleading or deceptive conduct law 33 times, and also failed to exercise his powers and discharge his duties as a direct with the degree of care and diligence required in the Corporations Act.
- Eagle was found to have breached the disclosure requirement three times and failed to exercise his powers and discharge his duties as a direct with the degree of care and diligence required in the Corporations Act.
Get our daily business news
Sign up to our free email news updates.