SA Over Embellishment of Company by Director - Misrepresentation?

[John Bennett]

Hi everyone, this is my first post on law answers - looking for a little advice.

Approximately two years ago, I made a significant investment in an ASX listed company by way of a capital raising. The MD of the company (one of the company directors) continued to misrepresent the timelines and targets via regular emails. A friend of mine, who also invested in the same company, joined me in a meeting with the Directors in Perth, where they continued to overstate the company's progress.

Over time it became obvious that the MD was lying to me. When I challenged him via an email which was cc'd to another executive director and my broker who was also present during our Perth meeting, he threatened to set his lawyers onto me. Several minutes later, I received a text telling me I had placed him in an awkward position and could I phone him. Over two years he has continued to send emails to me (sometimes on a daily basis) but rarely factual. I ended up selling the shares at a loss and the options which have a current portfolio value of $400,000 will expire worthless in October. They have had no buyers for 12 months due to company delays.

Do I have any recourse against this MD under commercial law for blatantly misrepresenting milestones and timelines for his company project?

Thanks

 

[John R]

Hi John,

1. There's been an increased number of ASIC investigations and litigation proceedings started by shareholders against ASX-listed companies and their directors for alleged breaches of their continuous disclosure obligations in recent years.
2. That said, from your brief question, I understand that your primary issue is that you've received continuous updates from an ASX-listed company's MD but you now believe the updates were inaccurate or misleading and this has resulted in significant financial loss to you.
3. On this basis, I would strongly encourage you to consider collating all relevant correspondence (e.g. meeting notes, call notes, copies of all emails between you and the MD, ASX annual reports and announcements) and engaging a commercial lawyer to review your specific situation and advise on the prospects of any claim against the ASX-listed company, the MD and/or its board.

Hope this helps. Please keep us updated with your progress.

 

[John Bennett]

Hi John R,

Thanks for your reply. Yes, over a period of several years a cowboy from the West was feeding me inaccurate information about my investment which has lead to a significant loss. I will do as you have suggested and consider my options. Thanks again.

 

[John Bennett]

Hi John or others,

Can someone tell me what constitutes a threat vs a course of action that will take place if an issue is not resolved.

i.e. If I ask a Company to resolve an outstanding legitimate dispute or I will take further action eg. forward my information of wrong doing to authorities, is this considered a threat? I don't wish to make a threat, just give them an opportunity to address my concerns which may involve compensation for losses.

Regards

 

[John Bennett]

Thanks Phillip, I am referring to the dissemination of misleading and nonfactual information from directors in private emails to me.

Statements such as, "WE ARE GOING RADIO SILENT, THE NEXT BIG CANNONS WE ARE ROLLING OUT need to be hidden in the trees until they go bang" and "There are some big buyers out the back, keep ahead of them". Are these considered market sensitive advice?

 

[Ivy]

Hi John,

1/ In legal terms, there is no difference between a threat and a statement that you will follow through with one action if they don't address your concerns. There is also nothing wrong with asking a company to respond to your concerns and stating that if they don't you will be taking the matter further.

However, as John R said, you should definitely seek legal advice on this matter before taking any further action or making any agreements with the company.

A solicitor will be able to review the information and correspondence you have and advise of the appropriate steps in order to get the outcome that you are hoping for. Usually in the first instance, your solicitor will make contact with the company in writing on your behalf anyway.

2/ In regards to your question about the statements that the company made to you: the statements that you quoted above are not specific and don't provide concrete advice (because they are metaphorical), so I think a solicitor will be able to assist you in reading all of the information you have and determining what damage it has caused.