The Court noted that “the matter took more time than any other scheme heard in this Court in the last ten or so years”.
The Court’s main concerns related to the nature of communications ResApp had with selected institutional investors, and also those that individual directors (particularly Leedman) had with individual shareholders.
For those with a remaining interest a few extracts from the judgement are collected below. Hot Copper is referred to as a “share trading website”.
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These communications included a communication between ResApp and a major institutional shareholder as to its attitude to the potential transaction, and ResApp also later engaged, after the scheme had been announced with an institutional shareholder which came onto its share register in that period.
He particular addressed two communications with an institutional shareholder in ResApp, one prior to the scheme, and a second while the scheme was under way, which took place where that institutional shareholder had undertaken not to trade in ResApp’s shares to the extent that it was provided with material non-public information at that meeting in order to comply with the insider trading prohibition in the Act.
ASIC raised an issue which I will address below in respect of a communication between a director of ResApp, Mr Leedman, and a ResApp shareholder and also raised a wider issue as follows:
“In addition, we observed in the materials accompanying your email below (being an email dated 7 September 2022 from ResApp to ASIC addressing shareholder communications) a general tendency for director communications with shareholders to be somewhat unbalanced, with an emphasis often given to the advantages of the scheme and the risks of not accepting the scheme.”
“As such, we hold concerns that Mr Leedman has been communicating in a manner that does not provide a fair and balanced view of the scheme and may infringe on the court’s approved messaging in the scheme booklet.”
By his affidavit dated 9 September 2022, Mr Leedman, who is an executive director of ResApp, addressed his communication with shareholders in respect of the scheme. One of those communications attracted ASIC’s particular attention. I am satisfied that that communication was prompted by Mr Leedman’s concern that information which that shareholder proposed to release on a share trading website was factually incorrect and potentially misleading. I also note that that shareholder subsequently published a note on that share trading website indicating that he had changed his view and considered that it would be “irresponsible” for him to continue to oppose the takeover.
As I noted above, ASIC raised a concern that Mr Leedman had advised the shareholder that ResApp was considering commencing legal action against him for defamatory remarks on that website and had sought to have the shareholder retract the comment and support a vote in favour of the scheme. Mr Leedman, in his affidavit evidence, denied saying that ResApp was considering legal action against the shareholder, although his affidavit acknowledged that he had said something to similar effect, raising the threat the ResApp would seek injunctive relief in respect of the publication of information that it perceived as misleading.
“Dr Keating and Mr Leedman, who are executive directors of ResApp, had more extensive communications with shareholders,… Each confirmed they made no general outbound calls to shareholders (other than returning missed calls…”
Mr Leedman was unable to provide any log of his calls or confirmation prior to 16 August 2022, where he has not been able to retrieve his phone records from his telephone provider
Indeed, the second Court hearing in this matter has involved more affidavits and took more time than any other scheme heard in this Court in the last ten or so years, including those which have involved much larger and more complex commercial transactions. It is very likely that that would not have occurred had ResApp and its executives adopted a more disciplined approach to their communications with shareholders.
