Lawyerly article copied below. A few things that stand out for me:
1. Why should Phillips get a stay on the class action which essentially deals with matters arising from the IPO prospectus whereas the ASIC action relates to continuous disclosure after the IPO???
2. How can Macquarie, as a joint lead manager, rely on Nuix’s commitment in the retainer letter to make reasonable enquiries during the process and in DD when Nuix’s directors included two Macquarie directors (Phillips and Standen) who had been intimately involved in the management of the Nuix business and any information flow through the DD process?
3. How can Macquarie rely on PWC for the same reason on information flow?
4. Is Phillips worried about perjuring himself and by staying the judgement giving himself the option to change his story down the track if they lose (or win) the ASIC case?
5. Is this just yet another tactic by the protagonists to chew up costs for the class action lawyers (and the company) hoping the whole debacle just goes away?
It all seems very strange.
Ex-Nuix director wants class action shelved until ASIC case wraps up
A former Nuix director has made a bid to stay a shareholder class action, which accuses the software company of failing to alert the market to red flags in the business, pending the outcome of separate proceedings by ASIC.
In his summons, former Nuix non-executive director Daniel Philips urges the Victoria Supreme Court to temporarily stay the class action until after the liability hearing in the Australian Securities and Investments Commission proceedings.
The regulator's case was filed in September last year in the Federal Court against the company and a handful of former and current directors over alleged misleading revenue announcements to investors. The matter has not yet been set down for trial.
According to orders handed down by Supreme Court Justice Lisa Nichols in December, Philips' stay application will be heard later this month.
Phillips, who was a member of Nuix's audit and risk management committee, won an interim bid to be excused from filing a defence to the class action or to any claim by a third party.
Both the class action and ASIC's enforcement action followed investigations into Nuix's November 2020 prospectus for its initial public offering in December that year, which forecast $193-5 million in revenue for the 2021 financial year, as well as the company's subsequent disclosures to shareholders. Nuix's share price suffered a 15 per cent drop when it downgraded its FY21 forecast in April 2021 and said it would not meet its prospectus guidance.
The regulator's civil penalty proceeding alleges Nuix engaged in misleading and deceptive conduct and breached its continuous disclosure obligations when it published its forecast for revenue and annualised contract value in ASX announcements made on February 26 and March 8, 2021.
ASIC is seeking disqualification orders against Philips, Nuix chairman Jeffrey Bleich, former CEO Rodney Vawdrey, and directors Susan Thomas and Sir Iain Lobban — who are alleged to have breached their directors' duties to take reasonable steps to prevent the company's alleged misconduct.
In its statement of claim, the regulator said that Nuix was aware that the annualised value of contracts for the financial year was likely to be "materially lower" than the published guidance at the time it made the announcements, and failed to make corrective disclosures.
ASIC alleges Nuix also failed to meet its disclosure obligations, including its obligation to disclose its ACV results from January 18 to February 26 in its 2021 half year results, and its obligation to downgrade its prospectus forecast after its ACV and statutory revenue had been reforecast from April 13. A downgrade was not announced until the following week.
Nuix denied ASIC's allegations in a market statement last year.
"Nuix has fully cooperated with ASIC during the course of its investigation into these matters," the company said.
"Nuix denies the allegations made against it and the allegations made against the director respondents and intends to defend the proceedings. "
The class action — which was consolidated in August last year after law firms Shine Lawyers and Phi Finney McDonald won a contest to jointly run the proceeding — similarly says the prospectus was misleading or deceptive, as were subsequent disclosures to shareholders in February, April and May 2021. The case names as Philips as a co-respondent.
The class action also targets Macquarie Capital, which served as joint lead manager and underwriter on the Nuix IPO. Macquarie Capital was also a major Nuix shareholder, netting a $575 million payday after cashing out its shares in the company.
If liability established, PwC did not have reasonable grounds for opinion, says Nuix
In its defence to the class action filed in November last year, Nuix pointed the finger at its accountant PricewaterhouseCoopers, which prepared an independent assurance report covering Nuix's forecast financial information in the IPO prospectus.
Nuix denies the class action's allegations, saying it had reasonable grounds for the forecasts of estimated future revenue in the prospectus and that PwC, as well as Nuix management and the IPO's due diligence committee, approved the numbers.
"In the assurance report, PwC represented that nothing had come to its attention which caused it to believe that the prospectus growth forecasts were not based on reasonable grounds or were themselves unreasonable," Nuix says.
Should Nuix be found to have made misleading statements, then "PwC did not have reasonable grounds for expressing the assurance opinion", according to the defence, and by expressing the opinion the accounting firm engaged in misleading or deceptive conduct.
If the court finds as alleged that shareholders paid an inflated price for their stock in reliance on the prospectus and Nuix's subsequent representations, PwC's contraventions caused or contributed to investors' loss or damage, the defence argues.
Macquarie has also filed a defence denying the allegations, and saying it relied on information and assurances received from Nuix, PwC and various other members of the due diligence committee — which included Nuix legal advisors from Clayton Utz.
Macquarie said it relied on an August 2020 engagement agreement with Nuix under which it agreed to act as a joint global co-ordinator, lead manager and bookrunner along with Morgan Stanley.
"Nuix promised Macquarie Capital Australia Limited that it would make reasonable inquiries and exercise due diligence to ensure that any disclosure document..., including the prospectus, did not contain any statements that were misleading or deceptive," Macquarie said.
That promise continued to bind Nuix when the prospectus was lodged on November 18, 2020, according to the bank.
Macquarie notes that Clayton Utz designed the IPO due diligence process — which took over four months — and performed the functions of committee chair and secretary.
Nuix is also facing a suit brought by former CEO Edward Sheehy, alleging his former employer owes him $183 million in options under a 2008 agreement.
The class action is represented by Lachlan Armstrong KC and Min Guo. Nuix is represented by Matthew Darke SC and Jerome Entwistle, instructed by Gilbert + Tobin. Macquarie Capital Australia Ltd is represented by Herbert Smith Freehills. Philips is represented by Watson Mangioni Lawyers.
ASIC's case is Australian Securities and Investments Commission v Nuix Limited & Ors. The class action is William Lay & Daniel Joseph Batchelor v Nuix Limited & Ors.
(20min delay)