C.1 Dr Stead
65 Dr Stead presented as a witness of the truth. Save for two aspects of her evidence which I will deal with below, I generally found her evidence to be impressive. She was responsive and presented as someone doing her best to give honest answers. Dr Stead obviously (and unsurprisingly) felt the weight of this litigation heavily and her testimony as to her subjective hurt was compelling. I will return to those specific aspects of her evidence when I deal with damages.
66 It is worth commencing by mentioning two (to an extent connected) aspects of Dr Stead's personal and business life that received a good deal of attention during the course of the evidence. The first was that Dr Stead had been, well prior to 2019, an enthusiastic and, at least in some respects, indiscriminate user of social media. This had caused some disquiet within Blue Sky and some criticism in the AFR. For example, in a Rear Window article written by Mr Aston on 28 May 2018 ("For Blue Sky, plausibility remains illusive"), the following appeared:
Blue Sky's VC boss Elaine Stead remains the worst (remaining) enemy of the company's negligible plausibility …
To Future Fund chief executive David Neal's comments last week that he wanted to put more capital into "global grade" Australian VC managers, Stead tweeted (to the headline, not the words in the article itself, naturally) that "no there's not" any shortage of local VC capital. Gold, given Neal's next line, that "it's not in our interests or the interests of the taxpayer I don't think for us to be investing in organisations that don't meet that grade".
Better still, though, were her thought bubbles on Sunday. "Lowest of lows today," she admitted at 3:19pm.
"OMFG I just heard the best news but it's a secret!" she tweeted at 6:54pm, turning on a dime, like a parody of a tween at a slumber party.
The only reassuring part of this unhinged drivel is just how late Blue Sky brings its VC chief into VC deals. Could there yet be financial redemption across the caravan parks of the Sunshine State?
Oh, and then she tweeted: "Yep, pretty sure I've lost my passport."
(Emphasis in original).
67 Devoid of any context (a topic to which I will return), the sending of these tweets does seem unusual conduct for a public company director in the midst of an existential crisis for the company on whose board she sat. Perhaps unsurprisingly, the next day, a shareholder and Ord Minnett investment advisor communicated with Blue Sky's then interim Chief Executive Officer, Mr Kim Morison in the following terms:
Someone kindly should perhaps take Dr Elaine Stead's mobile off her to stop tweeting… see below… is this for real?
If this is real…this only damages Blue Sky credibility further… if not, take Mr Aston to court.
Cheers
68 Mr Morison showed Dr Stead this communication (which had been copied to others within both Ord Minnett and Blue Sky) and reprimanded her. Mr Morison then communicated with the shareholder:
Appreciate your concerns. Yes, we've done what we need to do. Elaine no longer has a twitter account.
Regards
Kim
69 The disciplining of Dr Stead arising from her tweeting was perceived by her to have been conducted by Mr Morison in "heated" terms and amounted to mistreatment. Indeed, she considered it sufficiently serious to cause her to engage solicitors to provide her with advice. Notwithstanding this, although she gave evidence she considered it was "fair enough" for Blue Sky management to have asked her to stop tweeting, she also said that prior to the meeting with Mr Morison, she believed the media would leave her tweeting alone and not report on it. This was surprising evidence, given that a few weeks earlier, on 7 May 2018, the following insulting comments had been published in a Rear Window article written by Mr Aston entitled "Blue Sky meltdown continues, untruths now official":
Poor Elaine Stead, Blue Sky's own Brick Tamlin, sure doesn't sound happy. "So angry", she tweeted on Sunday evening, before adding, an hour later, "today sucked dogs (sic) balls." How fitting that on March 24 she tweeted that "your reputation and integrity is all you have." Lord knows what she'll do next - maybe go back and finish primary school?
(Emphasis in original).
70 That Dr Stead apparently held the view there was likely to be a lack of media interest in her tweeting was doubly peculiar given the issue had been previously raised with her by Mr Morison. This can be seen by her reference to a previous discussion in a draft email complaint she composed in relation to her upbraiding (the final version of which was not in evidence). The email records:
Although you did ask me to stay off Twitter until media interest dies down, I assumed that was in relation to Blue Sky related matters. The tweets you raised were personal tweets which were not related to Blue Sky and not inappropriate or unprofessional. I had also assumed the media focus had died down. When I resumed tweeting, it wasn't to go against your request, it was because I believed it was safe and that the tweets were innocuous and of a personal nature … I had reasonably thought these tweets were not news worthy as they were not work related … However I understand that in the current environment, every piece of information can be twisted negatively by those with an agenda so I have deactivated my account as you have requested.
71 Although I do not go so far as rejecting Dr Stead's evidence that prior to the meeting with Mr Morison she believed the general media would leave her tweeting alone and not report on it, given the contemporaneous intense media scrutiny of Blue Sky (arising from matters explained below) and her important role within Blue Sky as a public company director, it was, at best, a naïve view for Dr Stead to hold.
72 Before moving on, it is worth tarrying to observe a few matters including the distinction that Dr Stead drew in her complaint between "personal" and "professional" tweets. The supposed division raises interesting questions. What actually is personal in this context? To those of an age and cast of mind who have not embraced social media, the demarcation between what is private and public may be quite different to those more attuned to the contemporary zeitgeist. Speaking generally, to those accustomed to restricting one's private musings to family and a circle of close friends, the inclination and apparent readiness of social media users to "share" their feelings and their views on everything from fascism to fish fingers seems decidedly odd. For some on social media, emoting or the recounting the mundane often seems to co-exist with commentary on issues of public significance or discussion of professional matters of moment. But to be too quick to stigmatise a tweet as banal is to fail to recognise that often seems the point of the exercise. Those forming the community of social media users, or a sub-set of them, might have quite a different conception from others as to what is noteworthy or inappropriate, silly, or even risible. Mr Aston was emphatic in denouncing what he perceived to be Dr Stead's asinine posts, but anyone wishing to glance though the evidence of his tweets on foot massages or milkshakes might rationally form the view that they were without redeeming social importance.
73 Three points worth noting emerge from this: first, the context of a post on social media is important (which, as a habitué, Mr Aston would readily understand); secondly, it is unrealistic to assume that a mundane post by a newsworthy figure would necessarily stay within a community of social media users (something which Dr Stead should have understood); and thirdly, connected to the last point, given the nature of social media, characterising any post as being "private", if made by a person who has a role of public interest, is problematical.
74 The notion of context is important when one considers the second aspect of Dr Stead's evidence to which significant attention was directed: her connexion to, and communication with, her peers.
75 Dr Stead describes herself as a "Venture Capitalist". She and her colleagues repeatedly referred in their evidence to being part of an "ecosystem". This was not a reference to an ecosystem in the conventional sense, but rather, a buzzword used to describe the "open environment" where professionals with similar and different skills work collaboratively to assist one another in "raising new companies". Dr Stead was evidently an enthusiastic participant in the "ecosystem": she explained she was "a subscriber to the concept of 'give first'" and that she "believe[s] wholeheartedly in being that person for others in our ecosystem"; she did this by "volunteering my time and expertise to mentoring entrepreneurs and start-ups". Reciprocally, the evidence suggests her fellow participants within the "ecosystem" were a source of support to her. Part of this support and community, according to a fellow enthusiast and friend, Ms Monica Bradley (an investment advisor and company director), involved interactions on Twitter. Ms Bradley explained "all of us in the ecosystem, Australia wide, follow each other on Twitter". When asked why, she responded:
I think it's the nature of the Twitter technology, is the following kind of constitutes people of interest or what we would have called in the old days, communities of practice. So numbers of us follow each other, and that way then we share observations, learnings, information. But you know, I have - and everyone has very different interest groups. The ecosystem is one of mine, but I also have, you know, other people I follow on equality, or women's rights or the Eurocarbon community. So I follow a variety of people, but ecosystem communicates a lot via Twitter, and direct messages on Twitter.
76 Like many other communities of like-minded individuals, it is apparent from the evidence that those within the "ecosystem" communicated in a singular way that was apparently understood and appreciated by those within this so-called "community of practice". A good example has an especial relevance to this case, being a flyer from the Queensland Office of the Chief Entrepreneur's so-called "Adventurer-in-Residence", who entreated those "active in the Queensland entrepreneurial ecosystem" who wished to "improve their physical resilience and mental stamina" to travel to Mongolia to:
… summit a challenging local Khentii Mountain and learn about nomadic life - with interviews and hands-on experience with local families, along with progressing through introspective strategy and leadership workshops, all facilitated by The Nomadic School of Business team.
We will focus our immersion around the concepts of clarity, purpose and agility. Taking inspiration from our surroundings and the nomadic families we meet, the team will be guided through reflection on their own territory and season, the purpose of their team and organisation, and the qualities of agility needed to be truly responsive to your environment. We aim to help attendees see the world and themselves in a completely different way. We will also be meeting local entrepreneurs and Australians and other businessmen and women based in Ulaanbaatar.
77 To an outsider to the "ecosystem" and its interactions on social media, the public expression of private ruminations and the sometimes cloying expressions of support and mutual regard might seem easy to mock; but, as explained above, when considering the content and tone of Dr Stead's social media posts, it is necessary to bear in mind the context of the communications: they are thoughts primarily shared with persons likely to have a similar "mind-set".
78 From before her reprimand, Dr Stead had a "private" Twitter account. Mr Aston was aware of this from April 2018 when he received a message ("Elaine has gone private on Twitter! Say it ain't so!!": Ex 1, p 2990). But, as noted above, the label "private" is apt to mislead: the posts were still available to be viewed by her many "followers" (numbering about 5,000). Unlike Twitter, Dr Stead's Instagram account had never been available to the general public; she gave thought to whom she "accepted" on Instagram and indeed Mr Aston's request to follow her was rejected in April 2018. But it could hardly be said that the 500 to 600 followers she had on this medium amounted to a circle of intimacy.
79 As noted above, when the extent of her social media cohort is borne in mind, notwithstanding Dr Stead was directing her communications to the "ecosystem", it must have been apparent by at least mid-May 2018, that her social media comments may, given the public interest in the travails of Blue Sky, be decontextualised and be the subject of critical media interest and comment. Indeed, as the extract from her complaint to Mr Morison belatedly recognised, in an environment where Blue Sky was the subject of focus, "every piece of information can be twisted negatively by those with an agenda".
80 The reason why Dr Stead's comments were likely to be of public interest leads me to an aspect of her evidence which did cause me concern, that is, the evidence relating to her activity as a director of Blue Sky. To explain why, it is necessary to go into a little detail.
81 Dr Stead originally joined Blue Sky as the Head of Venture Capital. Blue Sky was a listed alternative asset manager (ASX: BLA) operating as a holding company for fund managers that invested in four alternative asset classes: private equity and venture capital, real estate, hedge funds and agriculture and resources. Between September 2016 and April 2018, Dr Stead was a director of Blue Sky (although she continued as a senior executive until her employment ended on 30 September 2019). Regrettably, in the submissions of both parties there was a repeated tendency to elide distinctions between: (a) Blue Sky the listed entity; (b) Blue Sky Venture Capital, which was not a legal entity, and which was described in the Agreed Background Facts (ABF) as a "division of Blue Sky", of which Dr Stead was "Investment Director" (defined as "BSVC": ABF at [7]; Ex 2, p 383); (c) the entity BSVC Pty Ltd, in respect of which Dr Stead was apparently appointed an executive director in July 2013 (ABF at [9]); and (d) the entity Blue Sky Private Equity Pty Ltd (BSPE). BSPE was a wholly owned subsidiary of Blue Sky and operated as an investment manager.
82 The listed entity Blue Sky was, at one time, perceived by many participants in equity markets to be a spectacular success. By the first half of FY2014, revenue had reached $8.15 million with the company projecting more than $500 million in assets under management (AUM) by the end of that financial year. The details of further growth do not need recounting; it suffices to note that a succession of further capital raisings took place to fuel an ambitious and expansive investment strategy.
83 By contemporary accounts, many seemed to think the strategy had worked. In June 2017, an article was published written by Mr Anthony Boyd, of the AFR's "Chanticleer" column. The column is prominent; indeed it self identifies as "Australia's pre-eminent business column". Among other things, the article ("Blue Sky Alternatives CEO Rob Stand fights back") reported:
There is no better example of the surge in interest in alternative assets than Blue Sky Alternatives, a Brisbane manager which has shot the lights out for the past five years. This week it revealed that its total funds under management had hit $3 billion, which is up about $1 billion from a year ago. It lifted its funds under management by about $1 billion in the previous year.
Blue Sky has about $1 billion in private equity, $1 billion in real estate and about $1 billion in water and agriculture. It has a small amount in hedge funds.
Blue Sky is well on the way to meeting its target of having $10 billion in funds under management and being the home-grown version of Wall Street alternative asset giants Blackstone and KKR.
Any company with the words Blue Sky in its name will have its fair share of sceptics …
There is no suggestion that Blue Sky Alternatives has any ['speccy'] features in its operations. First, it is not involved in mining. Second, its accounts are audited by respected firms and, third, its board includes respected Queensland business people.
But it has had its fair share of sceptics. In October and November last year, the short interest in the stock was equal to about 3.5 per cent of the issued capital.
Also, over the years Blue Sky has come under attack from bloggers and analysts claiming it is too reliant on asset revaluations and that its investment vehicles carry too much debt.
Chanticleer believes there is an element of the tall poppy syndrome wrapped up in the negativity towards Blue Sky. Many of the rumours have been proven to be wrong.
Chief executive Rob Shand is happy to deal with all the criticisms head-on. His arguments are quite persuasive, as shown by the fact that the level of institutional investment in Blue Sky's range of funds has jumped from zero five years ago to 37 per cent in 2016.
In response to the claim that returns are driven by unrealistic valuations of assets, Shand says that 28 of the 31 asset realisations made by Blue Sky since 2006 have been at valuations higher than book value. He says this shows an inherent conservatism in the accounting for the value of assets.
In response to claims that valuations are too easily pumped up, Shand says each asset must go through four separate sets of eyes. It starts with KPMG as valuer, then EY as auditor, then the board of the fund and then the board of the head stock, Blue Sky Alternatives.
…
(Emphasis added).
84 There are a number of reasons why this article was significant. First (and perhaps explaining why there was some short interest in Blue Sky shares) was that aspects of the business of Blue Sky were opaque; it had apparently not provided, by way of periodic or continuous disclosure, either a breakdown between gross AUM and fee earning AUM, nor a breakdown as between various asset classes. Secondly, as a consequence, the communication of an aspect of this information (that Blue Sky "has about $1 billion in [the] private equity" asset class) in a prominent article, was arguably information of some moment. Thirdly, given its apparent source and publication in the AFR, it was information likely to come to the attention of investors or potential investors. Fourthly, it was information which might arguably be thought to be of significance to those investing, including in the VC funds (leaving aside anything else, it may matter to a potential investor in a venture capital fund to understand the quantum of total private equity assets under management, as compared to say, the real estate assets or agriculture and resources assets - even though they all may be generating upstream fee income).
85 Dr Stead gave evidence she was not happy about the article because "it was incorrect"; indeed, she believed it was an inaccurate estimate of AUM for any of the business units. The following evidence was then given:
MR DAWSON: It would be a bit of a worry, wouldn't it, Dr Stead, if the financial world reading the [AFR] thought that that was the official company position when it wasn't?---Yes.
Didn't you think it was important to correct it if the company disagreed with it?---It was difficult to correct if we can't actually say the number for each of the assets under management.
HIS HONOUR: Why couldn't you say the number?---We had never disclosed the individual assets under management for each of our business units individually. We had only ever talked about it in its totality.
But that was a commercial decision - - -?---Yes.
- - - that was made?---Yes.
So up until the time … the information that the company had concerning the amount it had in private equity was information that was not generally available to the market?---Yes.
…
Did it concern you that given that in June [2017] it was - it had been conveyed inaccurately that Blue Sky had about 1 billion in private equity, that it may be appropriate for the communication to be made to the market to make it clear that the true position concerning the assets held in private equity were lower?---So the question was did it concern us, and the answer is yes.
Yes?---And there was much discussion about what to do, if anything.
Yes?---The consensus from the board in the end was to maintain our position, which was to not disclose assets under management by asset class, and because he hadn't said anything materially different to what we had disclosed in totality of about three billion under management the decision was made to just let it go.
…
MR DAWSON: If Mr Shand was responsible for the breakdown in that Financial Review article I showed you, namely one billion in private equity, et cetera, if he had told the Australian Financial Review that it follows from what you're saying that Mr Shand would have been misrepresenting the position, doesn't it?---Yes.
And did you take up with Mr Shand as a director of Blue Sky the fact that this was inaccurate and information going into the public domain that was wrong? ---Yes.
Right. And your evidence is that there was a discussion at board level, was there, to let it lie?---Yes.
86 A curious aspect of this case is that although the business and ultimate demise of Blue Sky was the subject of voluminous evidence, according to the parties (as recorded in a document filed in advance of the trial), the limited factual findings that need to be made as to the underlying business of Blue Sky (and its failure) are related to the substantial truth of aspects of the alleged proper material relied upon by Mr Aston.
87 Consistently with this, in support of a submission that Fairfax and Mr Aston had failed to prove that Dr Stead had a "poor track record", the following was said on behalf of Dr Stead:
The issue of why Blue Sky collapsed is not relevant to the facts in issue in this proceeding but … the March-April 2018 short-seller attack and related media coverage, including by Mr Aston and the AFR, affected the fundamentals of Blue Sky shortly thereafter.
88 The "attack" to which Dr Stead was referring was a report on Blue Sky by Glaucus Research Group California LLC (Glaucus), an activist short seller based in the United States, published on 28 March 2018 (Glaucus Report). The Glaucus Report was damning as to a range of matters, including the lack of transparency of Blue Sky. Dr Stead left the board shortly thereafter, but it was common ground that this was about redressing a deficiency of non-executive directors and had nothing to do with: (a) the publication of the Glaucus Report; (b) Blue Sky's attempted rebuttal of it; nor (c) any disagreement she had with the Board as to inaccurate AUM information being in the public domain.
89 Just as it is beyond the scope of this case to make findings as to why Blue Sky collapsed or the accuracy of the Glaucus Report, given the way the case is pleaded, it is also beyond my role to make findings as to the legal or moral appropriateness of Dr Stead and the other directors letting misleading information as to the extent of fee earning AUM, and the breakdown of AUM as between various asset classes, to be left unaddressed - notwithstanding people were investing in funds managed by Blue Sky and were buying the listed entity's shares.
90 During the course of the trial, at times, it seemed to be suggested that the failure of Blue Sky could be simply put down to the publication of the Glaucus Report and the consequent loss of investor confidence fuelled by the media (although, as noted above, Dr Stead's evidence was somewhat more nuanced on close examination). In her evidence in chief, Dr Stead was highly critical of Glaucus in noting:
By publishing what I believe to be biased opinions in [the Glaucus Report] that are not based on facts, Glaucus' aim was to panic Blue Sky investors and destroy their confidence in the company with a view to driving its share price down and exploiting the fall in the share price to make a significant profit. By doing so, it significantly improved its odds of being able to sell Blue Sky shares at a high price and buy at a low price …
I also believe Glaucus relies on the media to achieve its aim.
91 But when addressing why Blue Sky failed, in an article she wrote published on the website SmartCompany on 31 October 2019 ("The mainstream media sneers at success and revels in failure - and it feeds a culture of mediocrity"), to which she was taken in cross-examination, Dr Stead gave a somewhat more comprehensive response than simply blaming short sellers. She identified three main reasons for the debacle being:
[o]ur growth rate prior to the attack, combined with an activist short seller attack which was false, misleading and deceptive, and the board's mistakes in the wake of the attack. I wear part responsibility for at least one of these reasons.
92 Dr Stead did not resile from this statement in cross-examination, and confirmed that the reason for which she wore "part responsibility" was the company's growth rate. But to the extent it is relevant to credit, even this somewhat more complete account seems likely to miss the mark. Dr Stead accepted that Blue Sky's shares traded efficiently. The so-called "efficient market hypothesis" in its "pure" (or even "semi-strong") form has its persuasive critics, and no doubt distortions from fair market value can be caused by short sellers for a period (such as "short and distort" participants), but in the present case, Blue Sky ultimately responded to the Glaucus Report by placing further information into the market. Even assuming the Glaucus Report was inaccurate in material respects, ultimately one would expect investors acting rationally to have placed a fair value on Blue Sky shares based on the present value of projected future cash flows. The apparent problem for Blue Sky was that when additional information was revealed, the value placed by the market on the stock was very different than the heady days before, and immediately after, the "Chanticleer" column.
93 At this point it is convenient to identify and dismiss a submission made by Dr Stead connected to the activities of short sellers. It was suggested that it was somehow "improper" for Mr Aston to rely on information provided to him by anyone with a short position in Blue Sky. Speaking generally, market participants with long positions can be as biased as those holding short positions. Their perspective is different, but each perspective may be valid, provided one appreciates the respective partialities. It is unnecessary to go into the details, but it has been compellingly argued by financial economists that constraints on short selling can slow the dissemination of information into the market which, by impeding timely price responses to new information, undermines market efficiency. Leaving aside short term distortions, if the share price is seen as an equilibrium or fair value arrived at by all market participants, to exclude short sellers can systematically reduce the amount of information which should be reflected in the fair value share price. To submit, as Dr Stead did, that Mr Aston could not rely on any source or information to the degree he did, simply because it came or originated from a short seller is, with respect, jejune and I reject the notion that a journalist like Mr Aston was somehow obliged to ignore their views of the company or its officers in an a priori fashion.
94 The final matter to which preliminary comment should be made relates to the context of Dr Stead's social media posts and, in particular, the context of one Instagram post that followed on from the efforts of the Chief Entrepreneur's "Adventurer-in-Residence" to have members of Queensland entrepreneurial ecosystem gain "clarity" and "agility" by undergoing "immersion" in Mongolian nomadic life.
95 I referred earlier to the support Dr Stead perceived she received from those within her "community of practice". Following the release of the Glaucus Report, which was discussed widely in the "ecosystem", she attended a function and thereafter posted to Instagram a photo of herself with Ms Bradley, in which post she observed that Ms Bradley was a support to her, and explained:
When the chips were down, I was overwhelmed with love support and community. This woman is one of the awesome peeps [scil. people] in the Queensland ecosystem who has been a staunch sister.
96 She then went on to say that:
Along with many other sisters and brothers, many of whom I had the joy to see again tonight. You all know who you are. Thank you.
Now, given I'm currently broke, how am I going to crowd source $5k to go on the venture mission to Mongolia?
(Emphasis added).
97 As to the emphasised paragraph of her post, it was said by Fairfax and Mr Aston that Dr Stead did not give any direct evidence that this part of the post was a joke, despite having opportunities to do so. Moreover, the comments on the post in evidence do not appear to indicate that that was how it was understood by the two followers who responded to it (in fact they take issue with the fact that she referred to herself as "broke") (Ex 1, p 3893). It followed, it was contended, the Court ought to be slow to conclude the emphasised remark was a joke.
98 But to the extent subjective intentions are actually relevant, it was made plain on behalf of Dr Stead throughout the case that this aspect of the post was not to be taken literally. This was put to Mr Aston (no doubt on instructions), and was asserted to be patent from any fair reading. I have little doubt, given the context of the post, that by her last paragraph Dr Stead was attempting to be light-hearted and was speaking in a jocular way to persons she considered colleagues and fellow enthusiasts of such "bonding" sessions. This was someone primarily conversing with "peeps" she considered her "brothers" and "sisters" in an emotional way. The joke might be perceived by some as being self-indulgent or injudicious (given that investors in Blue Sky and the funds she had managed had suffered financially), and two people may have taken issue with any assertion she was broke, but any want of tact did not mean this aspect of the post was not an attempt at levity. It follows, contrary to the complexion Mr Aston put on the post, I do not accept that Dr Stead's post was an exercise in panhandling by a cadger trying to procure a free trip to East Asia.