Astra Resources Plc v Full Exposure Pty Ltd

IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 239 of 2012

JUDGE: BESANKO J DATE: 3 OCTOBER 2012 PLACE: ADELAIDE VIA VIDEO LINK WITH MELBOURNE

REASONS FOR JUDGMENT 1 This is an application by Astra Resources Plc ("Astra Resources") for an interlocutory injunction against Full Exposure Pty Ltd ("Full Exposure"). The orders sought are as follows: 1. The respondent remove all references to the applicant from the website Wikifrauds.net. 2. Until further order the respondent be restrained from directly or indirectly making the representations concerning the applicant contained in Schedule 1 to the Statement of Claim herein. 2 In Castlemaine Tooheys Ltd v The State of South Australia (1986) 161 CLR 148 at 153, Mason ACJ discussed the requirements an applicant must satisfy in order to secure an interlocutory injunction and said: In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction. 3 In Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 ("Australian Broadcasting Corporation v O'Neill") at 81-82 [65], Gummow and Hayne JJ said that the first requirement was that the plaintiff make out a prima facie case. Their Honours discussed the case of Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 and said: By using the phrase "prima facie case", their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. 4 A little later at 83 [70] their Honours said: There is then no objection to the use of the phrase "serious question" if it is understood as conveying the notion that the seriousness of the question, like the strength of the probability referred to in Beecham, depends upon the considerations emphasised in Beecham.

Astra Resources 5 Astra Resources is a company which was registered in the United Kingdom on 3 May 2011. Mr Barry Meerkin swore two affidavits in support of the company's application. He is a solicitor and a director of Astra Resources and he states that he is engaged as legal counsel for the company. 6 In its Amended Statement of Claim, Astra Resources alleges that it carries on business in Australia and elsewhere investing in a range of businesses and assets located around the world. The evidence as to the company's business activities is very general. It appears from Mr Meerkin's first affidavit that the company or one of its subsidiaries (for example, Astra Mining Pty Ltd (a company registered in Australia) or Astra Capricorn Investments Pty Ltd) enters into joint ventures for property developments which, on many occasions, involves Astra Resources issuing shares. 7 Astra Resources was listed on the Frankfurt Stock Exchange on 28 September 2011, and the price of its shares at that time was €1.50 each. Shares in Astra Resources have not been able to be traded because all shareholders agreed to an escrow restriction until 28 September 2012 or such other date as may be agreed by the shareholders. 8 When Astra Resources was admitted to the Exchange, its shares were listed on the First Quotation Board of the Exchange. Early in 2012, the Frankfurt Stock Exchange advised that it would be closing the First Quotation Board on 15 December 2012. According to Mr Meerkin, Astra Resources was required to make an election to be listed on a higher stock board of the Exchange. Astra Resources has elected to have its listing moved to the Prime Standard Board. 9 In or about May 2012, trading in the shares of Astra Resources was suspended by the Frankfurt Stock Exchange. Mr Meerkin said that this was during the period of a previous application to the Entry Standard and of "light trading" where trading could not be insured. 10 The sponsoring broker of Astra Resources is Renell Wertpapierhandelsbank AG and it issued an announcement on 6 September 2012 in the following terms: Renellbank and its advisers are pulling all the stops to lift the suspension of Astra Resources Plc (9AR) and expect the suspension to be lifted at short notice. In conjunction with the suspension, Renellbank is liaising closely with the exchange to solve the issue. Please be advised that the suspension is not a matter to do with Astra or its directors. In the meantime all parties are working closely together to achieve the upgrade to the prime standard of the Frankfurt Stock Exchange (Deutsche Boerse) and the emission of a securities prospectus.

Full Exposure 11 Full Exposure is a company which was registered in New South Wales on 2 November 2011. Mr John Richard Carter is the director and secretary of the company, and he holds the two $1 shares which have been issued by the company. 12 Full Exposure owns a website which is called Wikifrauds. The company does not trade and it is not registered for GST. It earns no income from Wikifrauds. All undertakings of Wikifrauds are run on a purely voluntary basis and the company receives no sponsorship from its Wikifrauds activities. Mr Carter describes the sole purpose of Full Exposure in the following terms: The sole purpose of Wikifrauds is to serve the community both in Australia and around the world by providing information about Australian and international frauds and scams. 13 The evidence establishes that a person is able to conduct a Google search of Astra Resources which will lead that person by way of the fifth entry to the Wikifrauds website.

The Wikifrauds website in relation to Astra Resources 14 Astra Resources' case is that material on the Wikifrauds website relating to it contravenes s 18 of the Australian Consumer Law. It does so because, Astra Resources contends, it contains representations that are misleading or deceptive or likely to mislead or deceive. In its Amended Statement of Claim, Astra Resources pleads the representations appearing on the Wikifrauds website in the following terms: 4. The material 4.1 Represents that it is presenting information in respect of fraud involving organisations mentioned on it. 4.2 Represents by use of a "red flag" indicator that the applicant is prominent in respect of fraudulent matters which are referred to in the material. 4.3 Specifically identifies the applicant by way of a prominent headline. 4.4 Represents that the applicant conducts its business in a way which requires or deserves a warning to potential investors and to the public. 4.5 Represents that potential investors should exercise extreme caution before investing in stock of the applicant. 4.6 Represents that the shares of the applicant are worthless. 4.7 Represents that the shares of the applicant are not tradeable. 4.8 Represents that the applicant has acted and is acting inappropriately in respect of its shares. 4.9 Represents that the applicant has engaged in deception. 4.10 Represents that the applicant has concealed the suspension of trading of its shares. 4.11 Represents that the applicant has lost $750 million in funding. 4.12 Represents that the applicant is associated with a scam. 15 Printouts of the Wikifrauds website in relation to Astra Resources were part of the evidence before me. There have been some changes to the website since this proceeding was commenced on 19 September 2012, but they are not material for present purposes. 16 This evidence shows that if a person goes to the Wikifrauds website they are welcomed and then warned that a company called Western Gulf Advisory is a "complete scam". There is then reference to a new "red flag", being Astra Resources, and a link. Immediately under that statement, the statement "Wikifrauds uncovers more international fraudsters!" is made. In the part of the website which refers to Astra Resources, there immediately appears a warning with an exclamation mark and the following statements: Potential investors are advised to exercise extreme caution before buying this stock. New information is coming to Wikifrauds concerning the activities of Astra Resources Plc. From what we have been able to discover, this outfit may be a well organised sophisticated business dealing in their own worthless and untradeable shares. There was then a reference to "the Astra Resources team" and photographs and names of that team. 17 There is a reference to evidence from alleged victims and links to must-read articles which expose deceptions by Astra Resources "as to the veracity of their claims and are backed up by people who Astra claimed to have done deals with". There is a reference to an article in the Sydney Morning Herald on 21 May 2012, and to an investors night. It is alleged that a representative of Astra Resources did not, at the investors night, mention that the shares in Astra Resources had been suspended from trading on the Frankfurt Stock Exchange. There is then a reference to the fact that the shares in the company were suspended on the Frankfurt Stock Exchange and an allegation that at no stage since the suspension had Astra Resources reported the fact that the shares were suspended because they were not properly insured. There is a reference to the fact that the operator of the website has received a "deluge of information" from shareholders and other stakeholders in Australia and worldwide, and that based on this information, "we again strongly recommend that potential investors exercise extreme caution and undertake thorough due diligence before making a decision to invest". There is then a reference to this proceeding and its possible consequences in terms of the website. 18 There follows a message apparently from the Frankfurt Stock Exchange and then this statement: Communications and updates from Astra state the contrary and will have people believe that delisting is part of a process of moving stocks of this category to the London Stock Exchange. The fact is, the stock is suspended. We will shortly publish all trading figures, prices and volumes so that people interested in this information may make better informed opinions. 19 There is then a reference to relationships between Astra Resources and companies in the United States. There is an allegation that Astra Resources had broken certain agreements with companies in the United States and was being sued in the United States. There is reference to a company called MidOil and an allegation that it has withdrawn a lending platform of some $750 million from Astra Resources. This section of the website ends with the following statement: Wikifrauds will continue in-depth research into this company and its people, but meantime we ask that any investors out there who wish to contribute their story are urged to do so in total confidence - we always protect our sources. If you think you have been scammed also, please contact us. 20 Finally, there is a section dealing with "Dodgy Blogs". The following statements appear under that heading. The Australian Online Stock Forum, TopStocks, had a blog thread running from late June 2011 to early March 2012. The discussion forum is almost 100% pushing the shares in Astra as a great deal. It certainly appears that most of the bloggers are pro Astra, and one could easily think that in fact the bloggers were Astra staff or cronies. The odd differing blog such as the one below that expressed any doubts were quickly pounced on by other bloggers. These blogs also carry many statements by Astra themselves, and this really looks like Astra have been using this forum in a self-serving manner to drive share prices north. (Check discussions.) 21 In my opinion, the statements on the Wikifrauds website in relation to Astra Resources are capable of constituting the representations pleaded by Astra Resources, or at least the bulk of them. 22 Astra Resources' case is that the representations are untrue and therefore the publication of them is conduct that is misleading or deceptive or is likely to mislead or deceive. It relies on the evidence of Mr Meerkin to establish that the representations are untrue. At this stage of the proceeding I am not deciding whether the representations are true or false. It is sufficient for me to say that if the evidence of Mr Meerkin is accepted, the representations are untrue, or substantially untrue, and therefore misleading or deceptive or likely to mislead or deceive. I have no doubt that the representations are capable of causing substantial damage to Astra Resources and its subsidiary companies. Astra Resources has established a prima facie case or serious question to be tried and the balance of convenience appears to favour it. Full Exposure does not trade and there is no suggestion that it will suffer any form of economic or commercial loss if the injunction is granted.

The Submissions advanced by Full Exposure 23 Full Exposure made a number of submissions in opposition to the application for an interlocutory injunction. 24 First, it submits that the entities which would read the Wikifrauds' website are likely to be sophisticated investors. They are likely to disregard any extravagance in language and whether statements are misleading or deceptive or likely to be misleading or deceptive is to be judged in that context. To a point that submission may be accepted, but it does not overcome the fact that, overall, the website makes very serious allegations of impropriety. 25 Secondly, Full Exposure submits that, as to some of the statements, there is evidence that they are true. It submits that the suspension of the shares of Astra Resources suggests that its shares are "untradeable". It further submits, with some force, that Astra Resources has not put forward detailed evidence of its business activities or of its financial condition. Whether "untradeable" in the context in which it appears means no more than suspension on the Frankfurt Stock Exchange is perhaps debatable, but, in any event, the matters identified by Full Exposure go no further than suggesting arguable issues of fact as to some of the statements on the website. 26 Thirdly, Full Exposure submits that the statements on the website were not made "in trade or commerce" for the purposes of s 18 of the Australian Consumer Law. It submits that this is the decisive question on the application. It is important to note that all I need to decide on this application is whether it is sufficiently arguable for the purposes of an interlocutory injunction that the statements were "in trade or commerce": Advanced Hair Studio Pty Ltd and Anor v TVW Enterprises Ltd (1987) 18 FCR 1 ("Advanced Hair Studio") at 13-14 per French J (as his Honour then was); Tobacco Institute of Australia v Woodward (1993) 32 NSWLR 559 ("Tobacco Institute of Australia") at 573 per Bryson J). 27 Full Exposure relied heavily on the observations of Bryson J in Tobacco Institute of Australia at 572-573 and those observations do provide support for its argument. 28 The two leading High Court authorities on the scope of the phrase "in trade or commerce" in s 52 of the Trade Practices Act 1974 (Cth) ("Trade Practices Act") are Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 and Houghton v Arms (2006) 225 CLR 553. I considered those cases in two recent decisions: Crossman v Taylor (No 3) [2011] FCA 734 at 249-262 (see also the Full Court in Taylor v Crossman (No 2) (2012) 199 FCR 363 at 32-53) and Barker v Commonwealth Bank of Australia [2012] FCA 942 at 380-385. Full Exposure itself appears not to be acting "in trade or commerce". However, Astra Resources contends that that is not necessary in order for its conduct to fall within the statutory phrase. It relies on the following passage in Houghton v Arms at 565 [34]: Moreover, in his judgment in Concrete Constructions, Toohey J emphasised that, while in most cases, the focus would be on the nature of the business of the party making the representation, section 52 was not so limited; in particular, the section did not, in terms, refer to the trade or commerce of any particular corporation. Accordingly, statements made by a person not himself or herself engaged in trade or commerce may answer the statutory expression if, for example, they are designed to encourage others to invest, or to continue investments, in a particular trading entity. (Citations omitted.) 29 Astra Resources contends that the same principle applies whether the statements were designed to encourage or to discourage others to invest or to continue investments in a particular trading entity. In this context it also referred to Fasold v Roberts (1997) 70 FCR 489. 30 Astra Resources referred to the decision of the New South Wales Court of Appeal in TCN Channel Nine Pty Ltd v Ilvariy Pty Ltd (2008) 71 NSWLR 323 and in particular the following observation of Spiegelman CJ at 333 [49]: The High Court has determined that a representation can be made in trade or commerce even though it is not in the trade of the person making the representation, so long as it is in the trade of the person to whom the representation is made (see Houghton v Arms (2006) 225 CLR 553 at 565 [34]-[35]). 31 With respect, I think it is arguable that Houghton v Arms does not go quite so far as Spiegelman CJ suggested. However, that is not to the point on this application. It is clearly arguable on the present state of the authorities that the statements on the Wikifrauds website to potential investors or joint venturers about Astra Resources' activities were "in trade or commerce" for the purposes of s 18 of the Australian Consumer Law. 32 Fourthly, Full Exposure submits that in considering whether to grant an interlocutory injunction I should, as in a claim for an interlocutory injunction to restrain an alleged defamatory publication, give weight to the public interest in the right of free speech and to the fact that a claim of truth or justification remains unresolved. It referred to the observations of Gleeson CJ and Crennan J in Australian Broadcasting Corporation v O'Neill at 66-69 [16]-[19]. Allied to this submission is the submission that I am able and should take into account the interests of third parties, that is, potential investors and joint venturers in Astra Resources (Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1). 33 This is not a claim based on the publication of material which is alleged to be defamatory. It is a claim based on s 18 of the Australian Consumer Law. At the same time, I acknowledge that this is not a case like some cases under s 52 of the Trade Practices Act where protection of consumers from loss or damage is a factor in favour of a grant of interlocutory injunction. 34 Fifthly, Full Exposure submits that the orders sought by Astra Resources are too wide. I do not agree. There is no suggestion that Full Exposure conducts a website other than the Wikifrauds website and the very name of that website suggests that those entities or persons who appear on it carry out improper and illegal activities. 35 In my opinion, Astra Resources has established a right to an interlocutory injunction. The allegations on the Wikifrauds' website in relation to Astra Resources are very serious allegations and Astra Resources has shown a sufficient likelihood of success to warrant an interlocutory injunction. The statements on the website are likely to cause substantial damage to Astra Resources for which damages are not likely to be an adequate remedy. There is no evidence that Full Exposure will suffer any economic or commercial loss if the orders are made and the balance of convenience is in favour of Astra Resources. 36 It was suggested by Astra Resources that in the circumstances it was not necessary for it to give an undertaking as to damages, although it said that it was prepared to do so. In absence of detailed argument on the point, I think the prudent course is to include an undertaking as to damages by Astra Resources in the orders I will make.

Conclusions 37 I note the undertaking as to damages. I will make an order that until further order: (1) The respondent, its servants, agents and employees remove all references to the applicant from the website Wikifrauds.net or any other website operated by it including by way of links to material on the internet. (2) The respondent, its servants, agents and employees be restrained from directly or indirectly making the representations concerning the applicant contained in Schedule 1 to the Amended Statement of Claim. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.