GREEN -v- FAIRFAX MEDIA PUBLICATIONS PTY LTD [No 2] [2020] WASC 485 (21 October 2020)

(a) Power Ledger's ICO; or

(b) Power Ledger's Bounty Campaign.

1. All documents and correspondence referring to Power Ledger's ICO.
2. All documents and correspondence referring to Power Ledger's Bounty Campaign.

1. Bounty Campaign is defined to mean a program whereby a company launching an ICO allocates or promises to allocate free tokens or other rewards to individuals who promote the ICO in accordance with predetermined criteria.
2. Power Ledger's ICO is defined to mean the ICO (that is, initial coin offering) conducted by Power Ledger between about August 2017 and about October 2017 and includes the pre-sale phase of the ICO conducted by Power Ledger.

1. Order 36B r 8A(2) of the Rules of the Supreme Court 1971 (RSC) provides that on a request by a party the court may, amongst other things, set aside the subpoena or part of it. The court will set aside a subpoena that has no legitimate forensic purpose. A subpoena has a legitimate forensic purpose if there is a reasonable possibility that the documents sought will materially assist the defence. A document may materially assist the defence even if it is not admissible in the proceeding.

1. The defendants submit that the legitimate forensic purpose served by the subpoena is that it seeks documents which are relevant to issues in dispute between the parties. In particular, the defendants say that the documents are relevant to the issue of whether during the ICO the plaintiff caused or encouraged unethical market manipulation by Power Ledger using undisclosed paid spruikers to promote it and its POWR token. The defendants refer to [30A] of their substituted defence, in which they plead that the imputations that the plaintiff causes, alternatively actively encourages, unethical market manipulation(s) by Power Ledger using undisclosed paid spruikers to promote it and its POWR token, is true, and the particulars under that paragraph.
2. Counsel for the defendants, Mr Dawson SC, referred specifically to [28] of the particulars which provides:

During the ICO, Power Ledger used Bounty Campaign Participants (including but not limited to Bot Accounts and Bounty Hunters (including Professional Bounty Hunters)) to produce, post and interact with online promotional content that had the effect (in the aggregate) of:

(a) generating the appearance of a greater than actual level of public interest in Power Ledger, the ICO and the POWR Token;

(b) elevating the profile of Power Ledger, the ICO and the POWR Token;

(c) attracting interest in Power Ledger, the ICO and the POWR Token from prospective "investors" and members of the public;

(d) Power Ledger, the ICO and the POWR Token achieving a degree of prominence for which they would otherwise have had to use paid advertising to achieve;

(e) creating the impression that the POWR Token was a worthwhile acquisition or investment by reason of its apparent popularity; and

(f) creating the impression that there was a significant number of persons who were sufficiently impressed by Power Ledger's achievements and future prospects (and/or the future value of POWR Tokens) that they were willing:

1. to 'invest' their own money in Power Ledger by acquiring POWR Tokens; and
2. to promote Power Ledger, the ICO and the POWR Token without reward.

1. The defendants submit that ASX announcements and an online article published by 'Stockhead' show that DigitalX was hired to assist Power Ledger with its ICO and this engagement involved the promotion of Power Ledger and the POWR Tokens. By its announcement of 4 October 2017, DigitalX advised that it had been engaged as an adviser to Power Ledger for its ICO. The announcement also said, amongst other things, that Power Ledger is offering 140 million POWR tokens as part of the main sale and that POWR tokens will effectively be auctioned to the public, generating interest from solar developers, renewable energy projects, retail investors and speculators. In its announcement of 13 November 2017, DigitalX advised, amongst other things, that significant interest was generated in Power Ledger's successful ICO through DigitalX advisory services including Australian and international solar developers, energy companies and investors. The announcement further said that the cryptocurrency investors introduced by DigitalX had a strong appetite for POWR tokens and DigitalX 'was pleased with our media partners in generating hundreds of thousands of dollars of media value'. DigitalX stated that in consideration for its strategic advice, DigitalX was offered a hybrid remuneration of ETH and POWR tokens, that DigitalX elected to receive the entire consideration in POWR tokens resulting in the issue of approximately 7.4 million POWR tokens valued at 11.5 cents per token and that after expenses of approximately 3 million POWR were distributed to the DigitalX network, DigitalX received net 4.5 million tokens.
2. Mr Dawson submitted that the announcement shows that DigitalX used its network to generate interest in the ICO and paid its network participants in POWR tokens. Mr Dawson says that this shows that DigitalX was itself a participant in the Bounty Campaign, used its network in the campaign and paid its network participants in POWR tokens.

1. In her affidavit sworn 5 October 2020 the plaintiff refers to the ASX announcements and further swears that DigitalX was engaged by Power Ledger in approximately October 2017, the only advisory service provided by DigitalX to Power Ledger related to the introduction of financial investors during the last week of the ICO, and no advisory services or advice were provided by DigitalX in relation to the Bounty Campaign.
2. Counsel for the plaintiff, Mr Bennett, submitted that no strategic advice was provided by DigitalX to Power Ledger in relation to the Bounty Campaign and there is therefore no legitimate line of enquiry to which the documents sought by the subpoena could relate. The plaintiff submitted that DigitalX's role during the ICO was limited to introducing cryptocurrency investors to Power Ledger in exchange for a fee, which consisted of a mix of ETH and POWR tokens. That is not a matter in dispute on the pleadings or relevant to any issue in dispute on the pleadings. Therefore, it is submitted, the subpoena serves no legitimate forensic purpose.

1. The relevant matter which the defendants seek to prove is that during the ICO Power Ledger used Bounty Campaign Participants to produce, post and interact with online promotional content that had the effect, in the way set out in [28] of the particulars to [30A] of the substituted defence, of generating an artificial level of legitimacy and value in respect of Power Ledger, the ICO and the POWR Token resulting in inflation of the prevailing market price of POWR Tokens during and immediately after the ICO.
2. There must be a reasonable basis beyond mere speculation to believe that it is likely that the documents sought by the subpoena will materially assist the defendants in their defence. It must be on the cards that the documents will bear on and have relevance to the issue of whether during the ICO the plaintiff caused or encouraged unethical market manipulation by Power Ledger using undisclosed paid spruikers to promote it and its POWR token in the manner set out in the particulars to [30A] of the substituted defence.
3. I am not satisfied that there is reason to believe that the documents sought by the subpoena will bear on and have relevance to that issue. DigitalX introduced investors in POWR tokens. The mere fact that DigitalX paid its network participants and itself received payment in POWR tokens gives rise to no reasonable belief that DigitalX or its network had anything to do with producing, posting or interacting with online content promoting POWR tokens in the manner set out in [28] of the particulars to [30A] of the substituted defence. The defendants' particulars make no reference to DigitalX or investors introduced by DigitalX or any entity advising or assisting Power Ledger in causing paid spruikers to promote on social media Power Ledger, its ICO or POWR tokens. There is no reason to believe, from the descriptions of the documents sought or the evidence before the court, that the documents will bear on or have any relevance to Power Ledger manipulating the market for POWR tokens in the manner alleged by the defendants' particulars. It is mere speculation that the documents sought by the subpoena will materially assist the defendants in their defence.

1. The subpoena should be set aside on the grounds that it serves no legitimate forensic purpose.

1. By a minute of proposed orders of 8 October 2020 the defendants seek an order that the plaintiff give discovery of the following documents:
   1. All business plans or strategic plans for Power Ledger created during 2017 and 2018, including executive summaries of any such documents (the Business Plans).
   2. All revenue models for Power Ledger created during 2017 and 2018 referring to the POWR token or peer-to-peer trading in Australian electricity markets (the Revenue Models).
   3. All documents evidencing the calculations referred to at paragraphs 350.1 and 350.2 of the amended supplementary witness outline of the plaintiff filed 10 September 2020 (the Calculations).
   4. All board papers, board packs, reports, meeting agendas and meeting minutes prepared for Power Ledger's board of directors (or any committee or sub-committee thereof) created during 2017 and 2018 referring to peer-to-peer trading in Australian electricity markets (the Board papers).

1. The application is made pursuant to both RSC O 26 r 6 and the court's inherent jurisdiction.

1. The court has inherent power to order a party to give further discovery. In addition, the court may order a party to give discovery of any specified document or class of specified documents that is or has at any time been in his possession, custody or power pursuant to RSC O 26 r 6(1). Whether, in the exercise of its inherent jurisdiction or pursuant to the rule, if, on the face of it, or from material before the court, the court has reasonable ground for being fairly certain that the documents are or have been in the possession of the plaintiff, and the documents relate to a matter in question in the action, the court may make an order. Any order for discovery of specified documents or classes of documents is discretionary having regard to the general principles articulated in the RSC including whether the discovery is necessary for fairly disposing of the proceedings: Roe v Western Australia;[1] Singh v Friedman.[2]
2. The primary debate between the parties is whether the Documents relate to a matter in question in the action. Relevance may appear from the nature of the document. It is to be determined according to the Peruvian Guano test.[3] The matters in issue are to be determined by reference to the pleadings but regard must also be had to the conduct and admissions of the parties and the nature of the action.

1. The defendants submit that the Business Plans are relevant to whether 'at all material times Power Ledger's business plan was to offer the Power Ledger Platform for use in peer-to-peer trading across the Grid' or whether only 'one aspect of Power Ledger's business plan was to form the Power Ledger Platform for use in P2P trading across the Grid'.
2. That issue arises in this way. In [32A] of their substituted defence, the defendants plead that the imputation that the plaintiff, by her creation, promotion and operation of Power Ledger, misleads the public and investors, is true. The defendants' particulars in support of that plea include at [32] that at all material times Power Ledger's business plan was to offer the Power Ledger Platform for use in peer-to-peer trading across the Grid. In her reply, the plaintiff pleads at [15.28] that she admits particular [32] except to say that one aspect of Power Ledger's business plan was to offer the Power Ledger Platform for use in P2P trading across the Grid.
3. Business plans or strategic plans for Power Ledger created during 2017 and 2018 are relevant to the issue of whether Power Ledger's business plan was to offer the Power Ledger Platform for use in peer to-peer trading across the Grid or whether that was only one aspect of Power Ledger's business plan. Power Ledger's business plans or strategic plans are likely to contain material that could rationally affect the assessment of the probability whether Power Ledger's business plan was to offer the platform for use in P2P trading across the Grid or whether that was only one aspect of its business plan.
4. A business plan is a document setting out a business's future objectives and strategies for achieving them. It is common for businesses, especially start-ups, to have business plans. In 2017 Power Ledger was a technology start-up company undertaking a substantial public fundraising. The plaintiff's pleading at [15.28] of her reply, that one aspect of Power Ledger's business plan was to offer the Power Ledger Platform for use in P2P trading across the Grid, is an admission that Power Ledger had a business plan. The court can be fairly certain that the business plan would have been contained in one or more documents.
5. The plaintiff does not dispute that the Documents in the possession, custody or power of Power Ledger are in her possession, custody or power. I find that there is reasonable ground for being fairly certain that the Business Plans are or have been in the possession, custody or power of the plaintiff and the documents relate to a matter in question in the action.

1. The defendants say that the Revenue Models are relevant to whether Power Ledger had a plan for how the Token Model would function in practice. They submit that this issue arises by reason of the plaintiff's denial at [15.66] of her amended reply of [85] of the defendants' particulars of [32A] of their substituted defence. At [32A] of their substituted defence, the defendants plead that the imputation that the plaintiff by her creation, promotion and operation of Power Ledger, misleads the public and investors, is true. The defendants' particulars in support of that plea include [85], which alleges:

It can be inferred or concluded from the matters stated in the preceding paragraph and the matters stated in paragraphs 69 to 82 above that, at all material times, Power Ledger did not know and/or had not developed a plan for how the Token Model would function in practice. In particular, at all material times, Power Ledger did not know and/or had not developed a plan for:

(a) how POWR Tokens would interact with SPARKZ Tokens;

(b) how demand for the POWR Token would increase over time, in the absence of speculative activity;

(c) how the value of the POWR Token would appreciate over time, in the absence of speculative activity;

(d) how individuals who paid money to acquire POWR Tokens would, in the absence of speculative activity:

1. recover monies paid; and

2. receive a return on their 'investment'; and

(e) how the Token Model would incentivise relevant stakeholders (including Authorised Retailers) to facilitate the widespread adoption of peer-to-peer electricity trading on the Power Ledger Platform.

1. The Token Model is defined at [2] of the defendants' particulars of [32A] of their substituted defence as the token model adopted or to be adopted on the Power Ledger Platform. The pleadings refer to Power Ledger operating POWR Tokens which allow holders access to and use of the platform.
2. At [15.66] of her amended reply, the plaintiff denies [85] of the defendants' particulars of [32A] of their substituted defence. In effect, the plaintiff denies that Power Ledger did not know and/or had not developed a plan for how the Token Model would function in practice. That is a negative pregnant and impliedly affirms that Power Ledger had a plan for how the Token Model would function in practice.
3. The Revenue Models are likely to contain material that could rationally affect the assessment of the probability whether Power Ledger had a plan for how the Token Model would function in practice. The Revenue Models are relevant to the issue referred to.
4. The defendants say that the existence of the Revenue Models can be inferred from an online publication by Power Ledger on 18 February 2018. The article refers to Ms Anya Nova, a member of the Power Ledger team, and says that she has 'a commercial responsibility at Power Ledger where she is spending most of her time optimising revenue models in the context of a tokenised economy'. The defendants submit that the task of optimising revenue models in the context of a tokenised economy would almost certainly result in the creation of documents. The court can be fairly certain that the Revenue Models will be contained in one or more documents in the possession, custody or power of Power Ledger and therefore of the plaintiff.

1. The defendants say that the Calculations, like the Revenue Models, are relevant to and relate to whether Power Ledger had a plan for how the Token Model would function in practice. I find that the Calculations are relevant for the same reason as the Revenue Models.
2. The plaintiff has filed an amended supplementary witness outline of 10 September 2020. At [350] of that witness outline, the plaintiff gives notice of the following matters of which she will give evidence upon the trial of this proceeding:

As to the allegation in particular 85(a), Dr Green will give evidence to the effect that:

350.1 Power Ledger has an internal calculation for the amount of POWR required which is based on the amount of megawatts of installed capacity that will be traded on the Power Ledger platform;

350.2 depending on the market setting, Power Ledger also has a calculation which measures an amount of POWR Tokens required which is a function of the amount of traded but not yet financially settled electricity which is reflected in SPARKZ Tokens (that is, the value of the electricity);

350.3 this interaction between the POWR Token and the SPARKZ Token is set out on page 17 of the Whitepaper.

1. That material gives the court reasonable ground for being fairly certain that the Calculations are or have been in the possession, custody or power of Power Ledger and therefore of the plaintiff and the Calculations relate to a matter in question.

1. The defendants submit that the Board Papers are relevant to and relate to the nature of Power Ledger's business, and in particular, the role that P2P electricity trading played in Power Ledger's business plans as well as to the issue of whether Power Ledger failed to disclose key vulnerabilities in its business plan in so far as it related to P2P electricity trading and the existence or nonexistence of a plan for how the Token Model would function in practice.
2. I am satisfied that records of proceedings and resolutions of directors meetings, including meetings of a committee of directors, which refer to discussions or resolutions about peer-to-peer trading in Australian electricity markets, relate to a matter or matters in question in the action as submitted by the defendants.
3. There is reasonable ground for being fairly certain that the Board Papers are or have been in the possession, custody or power of Power Ledger and of the plaintiff. A company must keep records of proceedings and resolutions of directors meetings, including meetings of a committee of directors. The plaintiff admits in her pleading that P2P trading in Australian electricity markets is an aspect of Power Ledger's business. The pleadings and materials before the court provide a reasonable ground for finding that such trading is a substantial, or at least not insignificant, aspect of Power Ledger's business. There is therefore reasonable ground for the court being fairly certain that P2P trading in Australian electricity markets will have been referred to in the Board Papers during 2017 and 2018.
4. The court has reasonable ground for being fairly certain that the Board Papers are or have been in the possession, custody or power of the plaintiff and the documents relate to a matter in question in the action the court.

1. I am not satisfied that discovering the Documents is oppressive or that there is any other reason not to exercise my discretion in favour of ordering the plaintiff to give discovery of the Documents.
2. The defendants have made this application at a late stage of the proceedings. The trial is to commence on 26 October 2020. The plaintiff and her legal representatives are busy preparing for the trial. Nevertheless it is in the interests of the fair resolution of the matters in issue in this action that the plaintiff give discovery and inspection of the Documents.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Roe v The State of Western Australia [2013] WASC 130.

[2] Singh v Friedman [2013] WASC 78 [3].

[3] Compagnie Financière et Commerciale du Pacifique v Peruvian Guano Company [1883] UKLawRpKQB 95; (1882) 11 QBD 55.