Source: https://download.asic.gov.au/media/tltlok0f/21-298mr-asic-v-getswift-limited-liability-hearing-2021-fca-1384.pdf
Factual Background
[176] In around late-February 2017, Fruit Box trialled the GetSwift Platform for its deliveries.159 Ms Mikac and Ms Dooley were responsible for setting up the trial of the GetSwift software.160
[177] During March 2017, the limited trial runs were not reaching Fruit Box’s expectations. In mid-March, Fruit Box was conducting trial runs in Victoria and South Australia during which a number of bungles occurred, including: the proof of delivery setting was difficult to use; errors occurred when drivers uploaded files; problems occurred with sending the files to Ms Gordon; a Victorian driver was not able to go online;164 a South Australian driver had a problem with the details displayed in the archived orders folder; the manifest appeared in alphabetical order instead of the correct sequence which was described as a “major issue” by Ms Mikac; and some drivers had difficulty logging on or were unable to go online at all.
[178] Ms Mikac explained that in mid-March 2017, Fruit Box still had ongoing issues when using the GetSwift Platform, and these “consistent issues with the platform” made her “hesitant” with “what [GetSwift] could deliver” and she was “starting to have [her] doubts”. Ms Mikac stated: “there were consistent issues every single day with the platform” and “it wasn’t a smooth run at all”, the GetSwift application did not work properly, and there were technical issues that continued throughout late February and mid-March.Termination of the Fruit Box Agreement
[184] On 17 March 2017, Mr Halphen sent an email to Mr Macdonald with the subject line “The Fruit Box Group & Get Swift: Misleading Public Announcement & Promotion”. In that email, Mr Halphen stated:
Unfortunately I am not contacting you under good circumstances. I am extremely upset with the way Get Swift have conducted themselves using our business brand for its own benefit. The areas that make this so incitable is firstly I made it clear in our meeting that nothing was to take place until we had a successful trial. Yes you said that you were following ASX protocol to justify investment made in our potential business but at the very least, courtesy and proactive communication in the form of consent should have been made given our position (but instead it felt that it was pretty underhanded). Second, your announcement states a 3 year deal and not qualifying that there is a conditional trial taking place.
We are now fielding approaches of people asking us for references and I have personally had 5 different conversations about our involvement with Get Swift. Essentially we have been misrepresented in the marketplace. We have spent years in this business trying to build a brand that we are proud of. In your self-serving interests (and please do not insult us any further and pass it off as ours), you have trivialized our position. Reputation is everything to me Joel, so please take this email very seriously and come back with a considered (and prompt) response of how you are going to turn this around.
[185] In a subsequent email on 19 March 2017, Mr Halphen wrote to Mr Macdonald:
Joel. Further to our conversation just before, I confirm our instruction for your WRITTEN response by 5pm March 21st (Eastern Standard Time). Should we not receive it or should your response not be satisfactory, our trial with Get Swift will be immediately cancelled and we will be briefing our solicitors of how we can correct our standing in the marketplace promptly.
[186] In his response on the same day, Mr Macdonald stated the following:
1. We did in fact inform your staff and company that we would be required to make an ASX announcement. Not only did we do it verbally we also did it in writing. So we DID disclose it that this would be part of the process. We did not get anything from your company saying this would be a problem. Again our apologies for any gaps in understanding. We actually had people ask for comments/PR and we turned them down as per our agreement. Please see enclosed email dated February 22nd (NYC time)
...
2. We did NOT indulge in any PR, marketing or publicity - we filed one ASX announcement as required and that was it. We categorically deny any misrepresentation.3. All we did was state the material facts as required and as we understood them to the best of our knowledge and interpretation.Therefore with all due respect I am not sure where you are getting the information that we have or are misrepresenting something. Some of the facts you have are not being relayed to properly.
Furthermore I have to wonder just who is responsible for feeding you this information and what their intent is. This may very well be doing harm to our company as a result and just like you are concerned and want to take action, so do we and will if need be.One thing that you are seriously wrong is thinking there are any underhanded or ulterior motives, if anything we should both be asking why allow anything to create a negative position for both our companies? If you are getting any queries, well please refer them back to us, we will deal with them if you prefer - anything to make it easier on you.Look we have to date, are and will invest a significant amount of capital to make this software solution work for you. We have not charged you a single dollar for the work we have done - and that is not something anybody does unless they are fully committed to make this work long term. I think that by itself is proof that we value you and wish you to think the same of us.
I hope we can move forward in the right direction. And when it comes to actual marketing or PR, I am more than willing to make it work the way you envision it needs to work and only with your pre approval in writing. If you would like to be included in a national campaign outreach we can do that. If you would like us to highlight you to any large corporates we do business with, we can do that. Bottom line you are a valuable client to us and we don’t want you to think any differently.
[187] On 20 March 2017, Mr Halphen responded as follows:
Joel. You still need to address your misleading statement and how you are going to rectify it. No contract for 3 years has been entered into as it is conditional on a trial. That is a material omission. Also, please provide proof and details of exactly what the ASX requires in terms of compliance.
[189] On the same date, Mr Halphen sent an email to the leadership team of Fruit Box informing them that GetSwift had released an announcement to the ASX despite the fact Fruit Box were “in trial only with them” and stated:
This release was made to the market 24/2. The share price went up 25 percent as a result (from 40 to 50 cents) which can be directly attributed to the release. As from March 1, the share price has continued its momentum {from 50 to 60 cents) without any announcements other than quarterly results. Directly or indirectly, this is somewhere between $10 to $20 million.
The good news is that we must have a strong brand among the public which Get Swift have ridden to coat tails on.
However, the bad news is that we are indirectly involved with misleading behaviour. Whilst there is a deadline of 5pm for GetSwift to respond tomorrow, there is no way we will be continuing with them. The best they can do is to make an altering public announcement and if they do, we will refrain from legal action.
[195] On 27 March 2017, a GetSwift board meeting was held. Ms Gordon gave a detailed account of what was said at the meeting in the course of her oral evidence in chief. Ms Gordon recalls that she was asked by Mr Macdonald to “please tell the directors what you told me regarding Fruit Box and the conversation you had with Ms Mikac”. Ms Gordon responded that she had had a conversation with Ms Mikac in which Ms Mikac had said words to the effect:
The contract is cancelled because the business didn’t want the contract to be announced to the ASX, and that the ... users were getting calls from competitors’ users [sic] asking them questions, “how is the system going”, when, in fact, they haven’t even seen the system yet. ... she also said that “we requested retraction but nothing happened”.
Judgement
[1291] The Fruit Box Agreement Information was important contextual and qualifying information when viewed in the light of the “price sensitive” Fruit Box Announcement, which engendered and reinforced an expectation among investors that GetSwift had entered into a three-year exclusive contract which would generate future revenue (subject to those risks and matters identified in the Prospectus). Indeed, the Fruit Box Agreement Information would have indicated to an ordinary investor that the benefits of the Fruit Box Agreement were significantly less certain given Fruit Box: (a) had not completed a trial period; and (b) could terminate the agreement such that the exclusivity period referred to in the Fruit Box Announcement would not materialise. I regard such information to have been important to the relevant class of investors when making an assessment of whether to acquire or dispose of shares in GetSwift; of course, bearing in mind that GetSwift was an inherently risky investment
[1302] On 20 March 2017, Fruit Box terminated the Fruit Box Agreement during the trial period (Fruit Box Termination Information). Mr Hunter admitted this fact, and GetSwift admitted it in its closing submissions. Mr Macdonald and Mr Eagle did not make a similar admission (although it is difficult to understand why).
[1315] Having satisfied myself that each of the four elements of the continuous disclosure contravention is made out, I conclude that GetSwift contravened s 674(2) of the Corporations Act by failing to disclose the Fruit Box Termination Information from 20 March 2017 until 25 January 2018.
