Blue Dog Group Pty Ltd v Glaucus Research Group California LLC [2024] QSC 37 (2024) 18 QR 189

SUPREME COURT OF QUEENSLAND CITATION: Blue Dog Group Pty Ltd v Glaucus Research Group California LLC [2024] QSC 37 PARTIES: BLUE DOG GROUP PTY LTD (applicant) v GLAUCUS RESEARCH GROUP CALIFORNIA, LLC (first respondent) AND MATTHEW WIECHERT (second respondent) AND SOREN AANDAHL (third respondent) AND ARGONAUT LTD (fourth respondent) AND EUROZ HARTLEYS LTD (fifth respondent) FILE NO: BS 14676 of 2023 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court of Queensland at Brisbane DELIVERED ON: 15 March 2024 DELIVERED AT: Brisbane HEARING DATE: 6 December 2023 (further written submissions provided 29 February 2024 and further oral submissions provided 15 March 2024) JUDGE: Brown J -- 1 of 30 -- 2 ORDER: 1. The fourth and fifth respondents produce to the applicant, by 26 March 2024, trading records and confirmations recording any transactions executed by the fourth and fifth respondents during the period from 20 March 2018 to 28 March 2018 (inclusive) in the following: a. Blue Sky Alternative Investments Limited (BLA) shares; or b. derivatives or other financial products used to take a short position in respect of BLA shares, save that relate to the fourth and fifth respondents engaging in such transactions on their own behalf and transactions by Totus Capital Day Ltd (as trustee for the Totus Alpha Fund). 2. The third respondent produce to the applicant by 26 March 2024 all documents recording any individual or entity, other than with respect to the fourth and fifth respondents and Totus Capital Day Ltd (as trustee for the Totus Alpha Fund), that: a. received a draft of the Report prior to publication; b. discussed the Report with the third respondent prior to its publication; or c. was aware that a report would or may be published by the first respondent in relation to BLA, in the period from 1 October 2017 to 28 March 2018 (inclusive). 3. The application against the first and second respondents be adjourned. -- 2 of 30 -- 3 4. That the applicant provide to Associate Brown J a draft order providing for substituted service of the second respondent in accordance with the reasons by 10.00 am on 16 March 2024, which will be made on the papers if her Honour is satisfied as to the terms of the order. 5. Liberty to apply on three days’ notice. CATCHWORDS: PROCEDURE UNDER THE UNIFORM CIVIL PROCEDURE RULES - ORDERS TO ASCERTAIN IDENTITY OF WHEREABOUTS OF PROSPECTIVE DEFENDANT – ORDERS FOR PRELIMINARY DISCLOSURE - where the first, second and third respondents are alleged to have communicated insider information in contravention of the Corporations Act 2001 (Cth) – where the first, second and third respondents are alleged to have engaged in misleading and deceptive conduct – where the fourth and fifth respondents are broking firms which allegedly facilitated transactions based on insider information – where the identity of persons who allegedly benefited from the use of insider information is unknown PROCEDURE UNDER THE UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – SERVICE OUTSIDE OF AUSTRALIA – PERSONAL SERVICE – SUBSTITUTED SERVICE – INFORMAL SERVICE - where the applicant is required to personally serve the originating process upon the respondents – where the respondents are outside of Australia – where the applicant made various unsuccessful attempts to serve the first, second and third respondents Acts Interpretation Act 1954 (Qld) Corporations Act 2001 (Cth) Service and Execution of Process Act 1992 (Cth) Uniform Civil Procedure Rules 1999 (Qld) Uniform Civil Procedures Rules 2005 (NSW) Agar v Hyde (2000) 201 CLR 552 AMCI Pty Ltd v Corcoal Management Pty Ltd [2013] QSC 50 Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd (2021) 65 VR 146 Kendell v Sweeney [2002] QSC 404 Lin v Google LLC [2021] FCA 1113 Re: Sunnya Pty Ltd [2023] NSWSC 1104 -- 3 of 30 -- 4 Ricegrowers Co-Operative Ltd & Seatide Pty Ltd v ABC Containerline NV & MED Containerline Antwerp NV (1996) 138 ALR 480 Roads & Traffic Authority (NSW) v Australian National Parks Pty Ltd [2007] NSWCA 114 Roads and Traffic Authority of New South Wales v Care Park Pty Ltd [2012] NSWCA 35 COUNSEL: P Dunning KC and W Wild for the applicants SOLICITORS: Allen & Overy for the applicants [1] The applicant, Blue Dog Group Pty Ltd (Blue Dog) applies for orders for the production of documents pursuant to rr 208C and 208D of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) against Glaucus Research Group California LLC (Glaucus), Soren Aandahl and Matthew Wiechert (together, the Glaucus parties), outlined in schedule 2 of its originating application. It also seeks orders for the production of documents against Argonaut Ltd (Argonaut) and Euroz Hartleys Ltd (Hartleys) pursuant to r 208C of the UCPR, outlined in schedule 3 of its originating application. In addition, it seeks documents outlined in Schedule 1 of its originating application from Glaucus pursuant to r 208D. [2] No parties appeared at the application. Argonaut and Hartleys, however, had indicated they were not intending to appear and, in the former case, did not consent nor oppose the orders sought and, in the latter case, consented to the orders sought. The Glaucus parties are all located in the United States of America. The question of service of those parties was a live issue in the application. Background [3] Blue Dog is an ASX listed company which own shares in the ASX listed company Blue Sky Alternative Investments Limited (then trading as “BLA” on the ASX). Blue Sky carried on a business of raising and managing funds and investments. Blue Sky’s sole director is Mark Sowerby, who was the founder and former managing director of Blue Sky. [4] In February 2017, the intention of Glaucus to undertake activist short selling in Australia was publicised through various Australian media outlets, but not the identity of the Australian companies that were to be targeted. Soren Aandahl is described as being the director of research of Glaucus at the relevant time. Matthew Weichert is described as the President of Glaucus at the relevant time. [5] On 28 March 2018 Glaucus published a report about Blue Sky (Blue Sky Report). The Blue Sky Report identified what the authors considered were a number a short fallings of Blue Sky. In particular, Blue Dog contends that the report suggested that: Blue Sky had overstated the value of its funds under management; Blue Sky had overstated the value of its investment and its investment returns; -- 4 of 30 -- 5 Blue Sky charged excessive management fees; and Blue Sky’s recently retired managing director, who also controls Blue Dog, had sold his shares because he expected the company to collapse. [6] Blue Dog contends there are a number of false or misleading statements in the Blue Sky Report such that it has a claim for misleading or deceptive conduct in contravention of the Corporations Act 2001 (Cth) (Corporations Act) based on the content of the report. While the report contains a number of opinions, the applicant contends that core allegations in the report were wrong or misleading and not supported by the reasons given (the particulars of which are set out in Annexure A to their submissions). [7] Blue Dog contends the Blue Sky Report was published for the purpose of causing the market price of Blue Sky shares to decline so that Glaucus Parties and their clients would profit from the short positions they then held in those shares and that, in fact, it caused the value of the shares to drop substantially, causing loss to Blue Dog. [8] Blue Dog also submits that it has a claim based on insider trading in contravention of the Corporations Act. It contends that the information that Glaucus “would or may issue a report” which was highly critical of Blue Sky (the Blue Sky inside information) was information not generally available and, if it were generally available a reasonable person would have expected it to have a material effect on the price or value of Blue Sky shares, derivatives or other financial products (Blue Sky related financial products). The Blue Sky inside information is alleged to have been disclosed to and deployed by market participants, including the broking clients of Hartleys and Argonaut, who knew our ought to have known that the information was not generally available in the market and that if the information were generally available, it would be expected to have had a material effect on the price or value of Blue Sky-related financial products. It is contended that the information was used by the broker clients to buy or dispose of, or enter into an agreement to do so, a Blue Sky related financial product between receiving the Blue Sky inside information and the release of the Blue Sky Report. [9] The Glaucus parties were said to have contravened s 1043A(2) of the Corporations Act by communicating the Blue Sky inside information to the broking clients. Any party associated with Glaucus who acquired or disposed of Blue Sky-related financial products prior to the publication of the Blue Sky Report are also said to have breached s 1043A of the Corporations Act. The basis of the claim is set out by Mr Shepherd in his first affidavit.1 [10] According to Mr Shepherd, Blue Dog has identified evidence that suggests that there was unusual trading in Blue Sky shares in the period shortly before the report was published. An independent expert, Mr Fehon of McGrath Nicol, has reviewed the trading data and identified that there was a significant increase in short selling activity between 15-28 March 2018 that was “unusual and warrants further investigation”. The share trading activity occurred through two broking firms, Hartleys and Argonaut, which is said to be unusual and not consistent with prior trading activity of Hartleys and Argonaut in relation to Blue Sky financial products. Mr Fehon considers that is the most likely explanation for the share activity is that those traders, had prior 1 Affidavit of Michael Shepherd affirmed 17 November 2023 at [35]. -- 5 of 30 -- 6 knowledge that Glaucus would publish the report critical of Blue Sky, although he canvasses other possibilities, [11] The claim for insider trading is proposed to be made by Blue Dog against: those market participants who engaged in the trading said to be short selling; anyone who disclosed the Blue Sky inside information; and potentially Glaucus itself, as an accessory. [12] The claim for misleading or deceptive conduct and/or false or misleading statements is proposed to be made against Glaucus and anyone involved in preparing the report, which may extend to officers of Glaucus and anyone with whom Glaucus communicated prior to the release of the report in a manner that leads them to be arguably “involved” in it for the purpose of s 79 of the Corporations Act. [13] Blue Dog contends that it has suffered a loss caused the alleged insider trading, being the reduction in value of its shares in Blue Sky, as well as a loss of market confidence. The alleged loss is also submitted to have been contributed to by the misleading and deceptive conduct, resulting in a diminution of Blue Dog’s shareholding to a value of nil by 13 May 2021. Rule 208C of the UCPR [14] Neither r 208C nor r 208D appear to have been the subject of authoritative consideration in this State. [15] Rule 208C provides, in relevant part: (1) The court may make an order under subrule (2) if it appears to the court that— (a) an applicant may have a right to relief against a prospective defendant; and (b) the applicant has made reasonable inquiries, but is unable to sufficiently ascertain the identity or whereabouts of the prospective defendant; and (c) another person may have information, or possession or control of a document or thing, that may assist in ascertaining the identity or whereabouts of the prospective defendant. (2) The court may order that the other person— (a) attend to give evidence relating to the identity or whereabouts of the prospective defendant as directed by the order; or (b) produce to the applicant a document or thing relating to the identity or whereabouts of the prospective defendant as directed by the order. … (4) Unless the court orders otherwise— -- 6 of 30 -- 7 (a) an application for an order under subrule (2) must be supported by an affidavit stating— the facts on which the applicant relies; and the information, document or thing in respect of which the order is sought; and (b) a copy of the application and the supporting affidavit must be served personally on the other person. (5) An application for an order under subrule (2) must be made— (a) if it relates to an existing proceeding to which the applicant is a party—by application in the proceeding; or (b) otherwise—by originating application. [16] The power of the Court to make orders as to preliminary discovery provided in r 208C was apparently introduced to supplement the power of the Court to order disclosure in addition to preliminary disclosure available under the principles set out in the House of Lords’ decision of Norwich Pharmacal Co v Customs and Excise Commissioners.2 There are a number of pre-conditions to making such an order which must be met given the intrusive nature of the order but the threshold of what must be established is tempered by the fact that the elements must be established to a level that it “appears to the Court” they are satisfied. The fact that there is a reference to “may” indicates it remains a matter within the court’s discretion. [17] Relevant to s 208C are a number of definitions contained in r 208B of the UCPR, including: “Prospective Defendant” means a person against whom the applicant intends to start a proceeding; “identity” of a prospective defendant is defined to include “the name and the occupation, if any, of the prospective defendant”; and the term “whereabouts” in relation to a prospective defendant is defined to include “a place of residence, a registered office, place of business or other location of the prospective defendant”. [18] As a result of the definition of “prospective defendant”, the LexisNexis commentary to the r 208C suggests that, in addition to the requirements outlined in r 208C (1), the Court must also be satisfied that the applicant intends to start a proceeding against the “prospective defendant”. I accept that is the case although how it is to be construed must have regard to the context in which it appears. [19] Caution must be exercised when reviewing courts’ analysis of similar, but differently worded, rules in other jurisdictions. However, these decisions do provide some assistance in considering how the local rule is to be construed. In New South Wales, r 5.2 of the Uniform Civil Procedures Rules 2005 (NSW) (NSW Rules) provides for preliminary disclosure to ascertain the identity or whereabouts of a potential defendant. That rule does not speak of a “prospective defendant” but, by virtue of the 2 [1974] AC 133. -- 7 of 30 -- 8 definition of “identity or whereabouts” in r 5.1, it must be established that the applicant for preliminary discovery seeks documents or information about the person against whom the applicant “desires to commence proceedings”.3 The desire must be “a bona fide desire” and not “merely a capricious desire unsupported by any ground for believing that the object of desire can be realised”.4 Thus more was required than the applicant “simply assert some subjective desire”.5 This is in contrast to the requirement in r 208(1)(a) that the applicant may have a right of relief against a “prospective defendant”, which imports the notion of an intention to bring proceedings . [20] In Roads and Traffic Authority of New South Wales v Care Park Pty Ltd, Barrett JA observed that:6 … As a matter of language, however, a desire may be characterised as something less fixed and certain than an intention or a purpose. A person with an intention or purpose has progressed to a degree of determination stronger than that of a person with only a desire. [21] In order to establish that a party “may have a right to relief”, the applicant must set out sufficient facts to satisfy the Court that it at least appears that the applicant may have an entitlement to relief, but it is not necessary to do so with precision or demonstrate that it may have a right to relief but not necessarily a prima facie case.7 The reference to “prospective defendant” in r 208C, must be construed having regard to the words “ may have a right to relief”, which qualifies the intention that must be shown. In my view having regard to the words and context of r 208C(1) it must be shown that the applicant has a genuine positively held intention to bring proceedings against the prospective defendant seeking relief but which may be conditional upon the applicant obtaining information as to the prospective defendant. [22] In relation to r 5.3(1)(a) of the NSW Rules, which includes a requirement that “the applicant may be entitled to make a relief from the court against a person”, Simpson AJA stated in O’Connor v O’Connor8 that: It may be emphasised that there is no requirement that an applicant for preliminary discovery establish even a prima facie case for relief; nor is it necessary that the applicant specify with precision the cause of action proposed, although it will be necessary, in order to make it “appear to the court” the applicant “may be entitled to make a claim for relief” that the applicant provide some particularisation of the nature of the relief in contemplation. That is so, not only to enable the court to form a view about whether the applicant may be entitled to make a 3 Roads and Traffic Authority of New South Wales v Care Park Pty Ltd [2012] NSWCA 35 at [105] per Barrett J (with whom Beazley JA and Campbell J agreed). 4 Roads and Traffic Authority of New South Wales v Care Park Pty Ltd [2012] NSWCA 35 at [106] per Barrett J. 5 Roads and Traffic Authority of New South Wales v Care Park Pty Ltd [2012] NSWCA 35 at [106] per Barrett J. 6 [2012] NSWCA 35 at [113]. 7 The words “may be entitled to make a claim for relief” in r 5.3 of the Uniform Civil Procedure Rules 2005 (NSW) were construed by Ball J in Racing New South Wales v Racing Victoria Limited [2023] NSWSC 576. 8 [2018] NSWCA 214 at [30]. -- 8 of 30 -- 9 claim for relief, but also to enable the prospective defendant, if an order is made, to determine which, if any, documents in possession are to be discovered. [23] Mr Shepherd has deposed to the basis upon which it is alleged that Blue Dog has claims for insider trading and misleading and deceptive conduct. Blue Dog positively intends to commence proceedings against the prospective trading relevant broking clients and Glaucus Insider defendants (referring to those associated with Glaucus who communicated or used insider information before the publishing of the report)9 if it can identify the prospective defendants from the documents disclosed. He also deposes to Blue Dog having informed him that it would commence proceedings against Glaucus if it obtains the requested documents, making it practicable to commence proceedings. It is the right to relief against parties for Insider Trading that is the basis for Blue Dog’s claim under r 208C and r 208D, not the claim for misleading and deceptive conduct. I am therefore not addressing the latter claim any further for the purposes of this decision. [24] In Roads & Traffic Authority (NSW) v Australian National Parks Pty Ltd, Mason P offers some assistance in identifying what is required to meet the threshold in r 208C(1)(b):10 … the applicant must be unable sufficiently to ascertain the identity or whereabouts of the intended defendant despite having made reasonable inquiries. What is reasonable is a question of fact in all the circumstances. The availability of other means of the ascertainment (eg resort to the FOI Act) does not in itself make it unreasonable to claim an alternative remedy under the rule … The cost, delay and uncertainty of alternative measures is relevant to the rule’s ‘reasonable inquiries’ component. [25] The question of whether reasonable enquiries have been made is an objective assessment.11 [26] In Roads & Traffic Authority (NSW) v Australian National Car Parks Pty Ltd, Mason P further observed in relation to a similar rule to r 208(1)(c) that:12 [15] …the applicant must show that the respondent to the application ‘may have information, or may have or have had possession of a document or thing that tends to assist in ascertaining the identity or whereabouts’ of the prospective defendant.13 … [16] The appellant correctly submits that the information, document or thing that is sought must itself have the requisite tendency in ascertaining identity or whereabouts. However, 9 Being those entities or persons who traded in Blue Sky related financial products while in possession of the Blue Sky Report and those persons associated with Glaucus who communicated the Inside Information to Broking Clients. 10 [2007] NSWCA 114 at [14] per Mason P (with whom McColl JA and Bell J agreed). 11 Age Co Ltd v Liu (2013) 82 NSWLR 268 at [52] per Bathurst CJ. 12 [2007] NSWCA 114 at [15]-[16] per Mason P (with whom McColl JA and Bell J agreed). 13 “Identity” is more broadly defined under r 5.1 of the New South Wales rules than the Queensland equivalent. -- 9 of 30 -- 10 the words “may” and ‘tends to assist’ in r 5.2(1)(b) show that the applicant does not have to establish in advance that the desired information, document or thing will necessarily reveal the identity or whereabouts of the prospective defendant… [27] The Queensland rule only requires that the information, document or thing “may assist in ascertaining the identity or whereabouts of the prospective defendant”, whereas New South Wales’ rule refers to “tends to assist”. Thus the Queensland rule has a slightly lower threshold. [28] If the pre-conditions are satisfied and the power in r 208C(2) is enlivened, the Court then has a discretion to make an order. At least in New South Wales, the view is that the discretion would only be exercised in favour of the applicant “when it is in the interest of justice to do so.”14 Similar considerations would apply in the exercise of the discretion under the r 208C, however it has not been made explicit as it has under r 208D. Rule 208D of the UCPR [29] Rule 208D provides: (1) The court may make an order under subrule (2) if it appears to the court that— (a) an applicant may have a right to relief against a prospective defendant; and (b) it is impracticable for the applicant to start a proceeding against the prospective defendant without reference to a document; and (c) there is an objective likelihood that the prospective defendant has, or is likely to have, possession or control of the document; and (d) inspection of the document would assist the applicant to make the decision to start the proceeding; and (e) the interests of justice require the order to be made. (2) The court may order that the prospective defendant— (a) disclose the document to the applicant as directed by the order; or (b) produce the document to the court as directed by the order. (3) Unless the court orders otherwise— (a) an application for an order under subrule (2) must be supported by an affidavit stating— the facts on which the applicant relies; and the document in respect of which the order is sought; and 14 Age Co Ltd v Liu (2013) 82 NSWLR 268 at [89] per Bathurst CJ (with whom Beasley and McColl JJA agreed). -- 10 of 30 -- 11 (b) a copy of the application and the supporting affidavit must be served personally on the prospective defendant. (4) An application for an order under subrule (2) must be made— (a) if it relates to an existing proceeding to which the applicant is a party—by application in the proceeding; or (b) otherwise—by originating application. [30] In order for the Court to exercise its discretion and make an order under r 208D(2), five conditions must appear to the Court: first, an applicant may have a right to relief against a prospective defendant, which again requires that the definition of prospective defendant be established; secondly, that it is impracticable for the applicant to start a proceedings against a prospective defendant without reference to a document; thirdly, that there is an objective likelihood that the prospective defendant has, or is likely to have, possession or control of the document; fourthly, inspection of the document would assist the applicant to make the decision to start the proceeding; and fifthly, the interest of justice require the order to be made. [31] The NSW Rules’ equivalent of r 208D is r 5.3. To the extent that r 5.3 uses similar terminology, the authorities with respect to its operation are of some assistance. In this regard, r 5.3(1)(a) is drafted in similar terms to r 208C(1)(a) and r 208D(1)(a). The approach discussed above in relation to r 208C(1)(a) also applies to r 208D(1)(a). [32] As has been noted in the LexisNexis commentary to the UCPR,15 there is some tension in the reference to “prospective defendant” and to the second and fourth conditions. The second and fourth conditions are premised on the absence of the document which makes it impracticable to commence the proceedings and that the document once discovered would assist the applicant to make a decision to start the proceeding. The commentary suggests that the tension should be resolved by construing the intention required for the purposes of r 208D to be a conditional intention which, in my view, is the proper construction of the rule in a way which accords with the wording of the rule and gives effect to all of the requirements in a harmonious way when read as a whole. The observations of Barrett AJA in Roads and Traffic Authority of New South Wales v Care Park Pty Ltd 16 provide some support for this observation. [33] Thus, it is sufficient as in the present case that there is evidence the applicant intends to commence proceedings against a prospective defendant if: they are permitted to inspect the document; and the contents of the document are such that it is appropriate to commence the proceeding. Application against fourth and fifth respondents 15 LexisNexis online commentary to the UCPR r 208D at [35]. 16 [2012] NSWCA 35 at [118]. -- 11 of 30 -- 12 [34] Hartleys is an Australian brokerage firm. It is one of the brokers which has been identified by the applicant and Mr Fehon as having clients engaging in unusual activity prior to the report of the Glaucus parties being released. [35] Hartleys did not oppose the orders that are sought. [36] Argonaut is the second brokerage firm whose clients have been identified as engaging in unusual activity prior to the Blue Sky Report being released. Argonaut has taken a neutral position, neither consenting to nor opposing the orders sought. Neither party appeared but both responded to Blue Dog’s lawyers in relation to the application and indicated they did not wish to appear. [37] Pursuant to s 17 of the Service and Execution of Process Act 1992 (Cth), Argonaut had 21 days to file a notice of appearance from the date of service. The hearing of the application occurred before the 21-day period had expired. Under s 17(1)(b), however, the Court may allow a shorter period. On the material before the Court in the present case, Argonaut had clearly been served with the application and determined not to appear. In those circumstances, the Court considers that it was appropriate for the matter to proceed notwithstanding the 21 days had not fully elapsed. [38] As I have referred to above, prior to the release of the Blue Sky Report on 28 March 2018, Mr Fehon, on the basis of his analysis of share trading data that he obtained from the ASX, noted there was a significant increase in short selling activity in Blue Sky Alternative Investments Limited shares and other Blue Sky related financial products between 15-28 March 2018 and that the share trading activity of the broking firms Argonaut and Hartleys was unusual and not consistent with previous trading activities, initially by Argonaut and then by Hartleys. Right to relief against a prospective defendant – r 208C(1)(a) [39] As to the requirement in s 208C(1)(a), Blue Dog contends that it may have a right to relief against the clients of Argonaut and Hartleys as a result of the evidence of unusual trading activity in Blue Sky shares just prior to the release of the Blue Sky Report identified by Mr Fehon. Blue Dog submits that the coincidence in the timing of trading activity just prior to the release of the report, shows at least some clients of Hartleys and Argonaut may have been aware prior to the issuing of the Blue Sky Report that Glaucus would or may publish the Blue Sky Report. [40] Mr Shepherd has deposed to the basis upon which it is said that Blue Dog could have a possible claim in respect of insider trading under s 1043A of the Corporations Act against the broking clients of Hartleys and Argonaut. He contends that the information that Glaucus would or may publish a highly critical research report in relation to Blue Sky was “inside information” for the purposes of s 1042A of the Corporations Act. That appears to be somewhat novel, particularly given the Blue Sky Report states, rightly or wrongly, that the information in the report is all publicly available.17 However, the Blue Sky Report was accompanied by opinions highly critical of Blue Sky based on that information and Mr Fehon’s analysis supports the fact there was unusual trading activity just prior to the release of the report. Although Blue Dog has a number of hurdles to overcome to establish that s 1043A applies, 17 MTS-10 to the Affidavit of Michael Shepherd affirmed 17 November 2023, 0389. -- 12 of 30 -- 13 including establishing the level of knowledge18 required by the broking clients and that the loss claimed flowed from the alleged conduct, Mr Shepherd has set out sufficient facts to demonstrate Blue Dog “may” have a right of relief against those broking clients privy to the pending release of the Blue Sky Report. The threshold is not a high one. [41] It therefore appears to the Court that Blue Dog may have a right to relief against some broking clients in relation to the alleged insider trading and that the broking clients are prospective defendants. As set out above Mr Shepherd has deposed to Blue Dog’s intention to commence proceedings against the broker clients if it obtains documents as to the identity and whereabouts of the broking clients of Argonaut and Hartley’s who engaged in the relevant short selling identified by Mr Fehon. While the mere assertion of such intention would not generally be sufficient, it is supported by the affidavit of Mr Shepherd and the report of Mr Fehon in terms of the basis upon which relief arising from insider trading might be sought. Reasonable inquiries to ascertain identity or whereabouts – r 208C(1)(b) [42] As to whether it appears to the Court under s 208C(1)(b) that the applicant has made reasonable inquiries but is unable to sufficiently ascertain the identity or whereabouts of a prospective defendant, namely the broking clients, Mr Shepherd has deposed as to the inquiries made and the correspondence sent. While publicly available information showed that Argonaut and Hartleys had been trading on behalf of their clients, it does not appear there is publicly available information identifying the broking clients on whose behalf Argonaut and Hartleys acted. Correspondence was sent to Argonaut and Hartleys enquiring as to the identity or whereabouts of the relevant clients. Both Argonaut and Hartleys have declined to provide the information on the basis that they claimed that they could not provide such details on the basis of privacy or confidentiality obligations. The second requirement that Blue Dog has made reasonable inquiries but is unable to sufficiently ascertain the identity or whereabouts of the prospective defendant is satisfied. Possession or control of a document or thing that may assist – r 208C(1)(c) [43] Under r 208C(1)(c), it must appear to the Court that Argonaut or Hartleys may have information, or possession or control of a document or thing, that may assist in ascertaining the identity or whereabouts of the prospective defendants. Argonaut and Hartleys could reasonably be expected to have records of their clients’ identities and whereabouts who engaged in the trading of the Blue Sky financial records in the period just prior to the release of the Blue Sky Report. The third requirement is satisfied. Should the order be granted [44] In my view, notwithstanding the intrusive nature of the order, particularly when there are no proceedings on foot, Blue Dog has satisfied the Court that the preconditions for making the order pursuant to r 208C(2) are satisfied. To the extent that there are references that the Court “may make an order” in r 208C(1) and “may order” in r 18 Whether they knew of the pending release of the Blue Sky Report and acted upon that knowledge is a matter of inference. That inference is at least supported by the co-incidence in timing of the trading activity just prior to the release of the Blue Sky Report. -- 13 of 30 -- 14 208C(2), importing the notion of a discretion, I am satisfied that the Court should exercise its discretion in favour of the granting of the application on the basis of the material that has been put before the Court and because it is in the interest of justice to do so. [45] The requirements of r 208C(4) and r 208C(5) of the UCPR have been complied with by Blue Dog. Scope of the order under r 208C(2) [46] The order sought against Hartleys, which was negotiated with Hartleys, is narrower than that sought in relation to Argonaut. The explanation for the difference was that the Hartleys order was negotiated on the basis that the applicant could return to the Court to request further orders if necessary. In my view, however, the narrower order negotiated with Hartleys is also the appropriate order in relation to Argonaut. The order, as presently proposed for Argonaut, is too broad in its terms and appears to seek documents which go beyond documents identifying the identity or whereabouts of defendants. [47] When this matter was listed for judgment delivery, the applicant sought to file and read an affidavit which exhibited a statement of claim including Argonaut and Hartleys as defendants. A further affidavit was filed and read, exhibiting emails from Hartleys’ counsel raising whether orders should be made in this proceeding, but they did not appear. It was quite proper for that affidavit to be filed to bring the Court’s attention to those proceedings. Mr Dunning KC appeared to make submissions as to the nature of those proceedings and why the Court could proceed to make orders in relation to the originating application, notwithstanding the issuing of the new proceedings. As the present application is directed to a right of relief against broking clients as prospective defendants, and identifying those parties, not Argonauts and Hartleys themselves, I was satisfied after hearing from Mr Dunning KC it would still be appropriate to make the orders sought. However, taking the proceedings into account and the fact that they are defendants, I have made exceptions to the orders in relation to records which relate to Argonaut and Hartleys transacting on their own behalf. I have also made an exception out of precaution to Totus Capital Pty Ltd (ACN 151 256 772) as Trustee for the Totus Alpha Fund (Totus), who is a defendant in the proceedings that have been issued and is alleged to have engaged in short selling. I adjourned delivery for a short period to amend these reasons and the orders in light of the further submissions made today. I have provided for liberty to apply in the order. Orders – the Glaucus Parties [48] Orders are sought in relation to the Glaucus Parties under r 208C and, in the case of Glaucus itself, r 208D of the UCPR. [49] Before proceeding to consider the merits of the application, it is necessary to consider whether the Glaucus parties have been served, given they are located extraterritorially. Whether Leave of the Court was required [50] Blue Dog submits that it did not require leave from the Court in order to serve the proceedings seeking preliminary disclosure against the Glaucus parties in the United States. Rule 125 of the UCPR allows an originating process to be served without leave -- 14 of 30 -- 15 if the relevant connection between the subject of the originating process and the jurisdiction is established. Blue Dog relies on the terms of rr 125(d)(ii) and 125(n) of the UCPR, which are applicable to the relief sought in the originating application. That rule provides that: An originating process may be served outside Australia without leave in the following circumstances— “… (d) if the claim— (i) is for an injunction to compel or restrain the performance of an act in Australia; or (ii) is for interim or ancillary relief in respect of a matter or thing in or connected with Australia, and the relief is sought in relation to a judicial or arbitral proceeding started or to be started, or an arbitration agreement made, in or outside Australia (including, without limitation, interim or ancillary relief in relation to a proceeding under the International Arbitration Act 1974 (Cwlth) or the Commercial Arbitration Act 2013); or (iii) without limiting subparagraph (ii), is an application for a freezing order or ancillary order under chapter 8, part 2, division 2 in respect of a matter or thing in or connected with Australia; … (n) if the claim is founded on a cause of action arising in Australia; …” [51] The decision of Button J in Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd supports the view that the originating process for preliminary discovery is a claim for “interim or ancillary relief in respect of any matter or thing in or connected with Australia”.19 In that case, his Honour considered a rule in very similar terms to r 125(d)(ii), namely r 7.02(d)(ii) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic). His Honour’s view that the preliminary discovery application was ancillary in nature was supported by the Federal Court decisions and Western Australian decisions to which his Honour referred.20 I agree with his Honour’s characterisation as well as the observation that the words “to be commenced” mean it is not necessary that a proceeding definitely or inevitably be commenced whatever the outcome of the application for ancillary relief.21 19 (2021) 65 VR 146. 20 Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd (2021) 65 VR 146 at [50]-[51]. 21 Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd (2021) 65 VR 146 at [58]. -- 15 of 30 -- 16 [52] I note that the application of r 125(n) to the present case is supported the decision of Wigney J in Lin v Google LLC,22 where his Honour found that relief sought by way of preliminary discovery in that case was capable of being characterised as a cause of action arising in Australia. Given the basis of the preliminary discovery application is the relief to which Blue Dog is said to be entitled relates to a contravention of the Corporations Act, the cause of action arguable arises in Australia. Given I am satisfied r 125(d)(ii) of the UCPR applies, it is unnecessary to consider it further. [53] In my view, the originating application seeking preliminary discovery under rr 208C and 208D is a claim within r 125(d)(ii) and leave of the Court was not required prior to Blue Dog seeking to serve the originating process outside the jurisdiction. Personal Service required [54] Rules 208C(4) and 208D(3) require an application and supporting affidavit to be personally served unless the Court otherwise orders. Relevantly, rr 208C(5) and 208D(4) require the application for orders to be made by way of originating application. Rule 105 of the UCPR also specifies that an originating application is required to be served personally. Mr Aandahl [55] Blue Dog contends that Mr Aandahl, the third respondent, was personally served in Texas, which occurred more than 10 days before the hearing of the application.23 [56] The evidence of service demonstrates that Mr Aandahl was served personally at his business address on 26 November 2023. This was verified by the affidavit of Mr Dathe, a process server in Texas. On that basis, I proceeded to hear the application against Mr Aandahl. [57] Mr Aandahl did not file any notice of address for service or appear at the hearing. Notwithstanding his non-appearance, r 129B of the UCPR provides that leave to proceed was not required. The reference in r 129B to “claim” could extend to an originating application, given the terminology of “claim” is used in r 125 UCPR. However, even where the action would be instigated by an originating application, r 129B refers to the failure to file a notice of intention to defend rather than a failure to provide an address for service.24 A notice of intention to defend is not filed to defend an application.25 While there is not an obvious reason why leave to proceed should be limited to a claim which requires a notice of intention to defend, the rule is clear on its face. [58] The applicant raised the point that that, while there is provision for an originating process to be served without seeking leave, there was no specific rule stating that an affidavit in support of the originating application may be served without leave. Indeed, to the contrary, r 129C of the UCPR provides that “a document other than an originating process may be served outside Australia with leave of the court”. Rules 208C and 208D both require that the application for preliminary discovery must be supported by an affidavit and, further, that the application is to be made by way of an 22 [2021] FCA 1113 at [16]. 23 See Affidavit of Michael Shepherd affirmed 5 December 2023 at [15]-[21], particularly [20]. 24 UCPR r 29. 25 UCPR rr 29(1), 134 and 135. -- 16 of 30 -- 17 originating application in circumstances where there is no proceeding on foot. There is strength in the applicant’s submission that there appears to be a lacuna in the rules insofar as it is anomalous that the originating application was required to be served without leave but leave is required in order to serve the accompanying affidavit which must be served with the application. That same distinction is made in other jurisdictions. Although Blue Dog submits that the Court should construe the originating application as if the affidavit was part of it, there is no support for that in the language used. It otherwise seeks such leave. In the circumstances, it is appropriate for me to grant leave to pro nunc tunc for the affidavit of Michael Timothy Shepherd affirmed 17 November 2023 to be served outside Australia upon the respondents in the United States. [59] I note that r 128 of the UCPR was complied with and the accompanying notice to the respondents served outside the jurisdiction was served with the other material served upon Mr Aandahl.26 Whether r 208C is satisfied [60] The applicant contends it has a right to relief under r 208C to obtain documents from the Glaucus Parties, including Mr Aandahl, recording any individual or entity that: provided information that was used to prepare the Blue Sky Report; was involved in preparing the report; received a draft of the report prior to publication; and discussed the report with any of the Glaucus Parties prior to its publication in the period from 1 January 2017 to 28 March 2018.27 [61] It seeks such documents on the basis it contends it “may have a right to relief” against prospective defendants, namely: any persons associated with Glaucus who communicated the inside information28 to the broking clients of Argonaut or Hartleys; and/or any persons who, in possession of that inside information, traded in the Blue Sky related financial product, (collectively, Glaucus Insiders). [62] In support of the fact that Blue Dog may have the right to relief against the Glaucus Insiders, Blue Dog relies on the “unusual” trading just prior to the release of the Blue Sky Report, identified by Mr Fehon, and what was described as a stone-cold admission in the Blue Sky Report that:29 “As of the publication date of this report, Glaucus Research Group LLC (a California limited liability company) (possibly along with or through our members, partners, affiliates, employees and/or 26 See for example NTS-47 to the affidavit of Michael Timothy Shepherd affirmed on 5 December 2023 and [18] of the second affidavit of Michael Timothy Shepherd affirmed on 5 December 2023. 27 Schedule 2 of the Originating Application. 28 “Inside information” being information that Glaucus would or may release the Blue Sky Report. 29 MTS-10 to the Affidavit of Michael Shepherd affirmed 17 November 2023, 0389. -- 17 of 30 -- 18 consultants) along with our clients and/or investors has a direct or indirect short position in the stock (and/or possibly other options or instruments) of the company covered herein and therefore stands to realise significant gains if the price of such instrument declines. … This report is not available to Australian residents.” (emphasis added). [63] Such evidence is not overly compelling, but sufficient to raise an inference that prior to the release of the Blue Sky Report, the persons and entities referred to had purchased Blue Sky financial products knowing the Blue Sky Report would or may be released. The share trading activity reported by Mr Fehon in Australia just prior to the release of the report gives some limited support to the inference that those trading had been provided with the inside information by one of the Glaucus parties or the trading was at the behest of one of the Glaucus parties or those associated with them. [64] For the reasons set out above, I am satisfied Blue Dog may have a right to relief under s 1043A of the Corporations Act against share traders who knew that the Blue Sky Report would or may be released and who traded in Blue Sky shares prior to its public release, and the parties who communicated that inside information to them. That would extend to those referred to in the Glaucus Report who traded in Blue Sky’s shares with knowledge of the inside information. [65] As set out above, Mr Shepherd has given evidence of Blue Dog’s intention to commence proceedings against the Glaucus Insiders if it obtains the relevant documents as to their identity and whereabouts. Blue Dog has provided sufficient evidence such that it appears to the Court that it may have a right to relief against the Glaucus Insiders for insider trading. The same hurdles to succeed in such a claim which I have outlined above apply, but it is not necessary to consider those matters further for the purpose of this application. [66] In his affidavit, Mr Shepherd sets out the basis of a claim for misleading or deceptive conduct, which includes that broking clients may have “aided, abetted, counselled or procured Glaucus’ contraventions, or were otherwise knowingly concerned in the contraventions (for example, by providing information to Glaucus that was used to prepare the Report) for the purposes of s 79 of the [Corporations] Act” and therefore, were involved in Glaucus’ contravention of s 1041H and/or 104E of the Corporations Act.30 That presently appears to be based more on speculation than any factual basis. There is an insufficient basis for me to conclude that it appears that Blue Dog may have a right to relief on this basis. Therefore, I will not make an order that the first, second and third defendants disclose information as to who provided information that was used to prepare the report or was involved in preparing the report. [67] As to the second requirement of r 208C(1), Blue Dog contends that the Glaucus Parties can be reasonably expected to have records of the individuals who were aware that the report would be published in the future and it submits this information would assist in ascertaining the identity of the Glaucus Insiders. It also contends that each of the Glaucus Parties can be reasonably expected to have records of contact details of 30 Affidavit of Michael Shepherd affirmed 17 November 2023 at [36]. -- 18 of 30 -- 19 Glaucus Insiders which may assist in ascertaining the whereabouts of the Glaucus Insiders. [68] The evidence supports the fact that Mr Aandahl held a senior position with Glaucus. Mr Aandahl is described on the McCoombs School of Business website as a “premier short activist investor” and his role with Glaucus as a director of research and chief investment officer. It is further stated “Under his leadership, Glaucus was named by Activist Insight Magazine as the 2016 short seller of the Year, sharing 28 short activist investment opinions with the market.”31 [69] Mr Shepherd has deposed to seeking such documents from the Glaucus Parties by sending emails and correspondence to various addresses, including Mr Aandahl’s business and residential addresses, requesting the documents now sought.32 Correspondence was also sent to his former lawyer, Mr Kennedy, who acted for him in the Blue Dog subpoena proceedings in Texas. Mr Kennedy sent an email in reply stating he did not represent Glaucus or the third respondent, Mr Aandahl, in any matter in Australia and therefore, was not authorised to accept or respond to the communication. [70] Correspondence was sent through various addresses to Matthew Wiechert and to his father David Wiechert, who had previously acted for Matthew Weichert and Glaucus in the subpoena proceedings. No response was received, other than from David Wiechert, stating that he did not represent Glaucus or Matthew Wiechert with regard to any matter in Australia. Blue Dog contends that it has made reasonable inquiries to ascertain the identity or whereabouts of prospective defendants which have been to no avail. Given knowledge of who any communications were made to would be confined, it is not apparent what other reasonable enquiry could be made in order for Blue Dog to identify any Glaucus Insiders or communication as to the report prior to its release. [71] I am satisfied that Blue Dog has made reasonable inquiries and r 208C(1)(b) is satisfied. [72] As to r 208C(1)(c) of the UCPR, it appears that requirement has been met; given Mr Aandahl’s position as director of research and chief investment officer for the Glaucus Research Group at the time of the production of the report, the Court is satisfied that it appears that he is a person who may have information or possession or control of the document or thing that may assist in ascertaining the identity or whereabouts of the prospective defendants, namely the Glaucus Insiders. [73] Given that service has been established and the requirements of r 208C have been met, I am satisfied it is appropriate to make the order in order 2 of the proposed order in relation to Mr Aandahl, save that the order will confined to the period of six months prior to 28 March 2018 and only be directed to documents in (c)-(e) of Schedule 2. I can see no evidence suggesting that the dissemination of insider information could reasonably have occured earlier than that time. [74] When this matter was listed for judgment delivery, the applicant sought to file and read an affidavit which attached a statement of claim where Mr Aandahl and Mr 31 MTS-8 Affidavit of Mr Shepherd p 0310-0311. 32 These addresses are set out in the Affidavit of Michael Shepherd affirmed 17 November 2023 at [47]. -- 19 of 30 -- 20 Weichert are identified as defendants, including for contraventions of s 1043A of the Corporations Act. It was quite proper for that affidavit to be filed and read in order to bring the Court’s attention to those proceedings. Mr Dunning KC appeared to make submissions as to the nature of those proceedings and why the Court could proceed to make orders in relation to the originating application, notwithstanding the issuing of the proceedings. The second and third respondents are named as defendants. As Mr Dunning KC submitted, the applications in relation to the first, second and third respondents under r 208C of the UCPR were directed to identifying third parties as prospective defendants to whom the inside information had allegedly been communicated and who engaged in short selling, not against first, second or third respondents themselves. I am therefore satisfied it is appropriate to proceed to make orders against the second respondent but to make exceptions as to the potential parties identified. [75] In light of the proceedings against Argonaut, Hartleys and Totus, I have made an exception to the order to excise those parties as being possible parties to whom disclosure would have to be made. Whether service has been effected on Glaucus or Matthew Weichert [76] Blue Dog accepts that its attempts to personally serve the first and second respondents have been unsuccessful. Blue Dog seeks orders that service has occurred informally under r 117 of the UCPR or for retrospective orders under r 116 of the UCPR. [77] Before considering whether rr 117 or 116 have been satisfied, an initial question that arises is whether those provisions apply to service overseas and can be relied upon where personal service has not been able to be effected. Service on persons or corporations is provided for in part 7 of Chapter 4 of the UCPR. Rule 129D provides service “need not be personally served on a person as long as it is served on the person in accordance with the law of the country in which service is to be effected” (emphasis added). On one reading of this rule, if personal service cannot be effected then the alternative is for the documents to be served in accordance with the law of the country in which they are to be served, and it would only be if those laws permit substituted service or informal service that such orders could be made. [78] There appears to be a further alternative for service available in relation to service in the United States, and particularly Texas, which is service under the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (Hague Convention). Provision for the Hague Convention is made in Division 3 of Chapter 4 of the UCPR. That was not a matter to which I was directed nor to which any submissions were made. The rules under the Hague Convention have not been construed as being prescriptive of service in those countries who are a party to the Convention.33 Given that, and the fact they were not the subject of submissions before me, I will not consider the application of Division 3 specifically. While a party is not confined to service in accordance with the Hague Convention, the fact that it is available may be relevant to whether service under Chapter 4 is impracticable in the sense of r 116 of the UCPR, given Division 3 of Part 7 of Chapter 4 provides for service under the Hague Convention. 33 Rio Tinto Shared Services Pty Ltd v English Datasystems LLC (2021) 65 VR 146 at [97] and [99]- [100]. While this case applies Victorian rules, those rules are substantially similar to the Queensland rules and I consider the analysis is applicable to the operation of the Queensland rules. -- 20 of 30 -- 21 [79] As to the inter-relationship between rr 116, 117 and 129D, I requested further submissions as to whether rr 116 and 117 can apply to service abroad or whether they can only apply if they accord with the law of the country in which service is to be effected. Unlike the position in the Federal Court, there is no express provision applying those rules to service abroad.34 [80] Although rr 116 and 117 are in Part 5 of Chapter 4, whereas the rules as to service abroad are contained in part 7 of Chapter 4, r 116 applies if “it is impracticable to serve a document in a way required under this chapter” (emphasis added). Rule 117 applies if “for any reason a document is not served as required by this chapter” (emphasis added). Rule 116(4) also provides that the Court may make an order under that rule even if the person to be served is not in Queensland or not within jurisdiction when the proceeding started.35 On their face, they apply to all provisions of service in Chapter 4 and are not confined to service within the jurisdiction. Nor is the application of those rules expressly excluded by the rules with respect to service abroad, unlike service outside Queensland but within Australia.36 [81] In the further submissions made, I was directed to the decision of Jackson J in AMCI Pty Ltd v Corcoal Management Pty Ltd (AMCI Case).37 At the time of his Honour’s decision, rr 116 and 117 were in the same terms as they presently are under the UCPR. However, rr 129A to 129D of the UCPR were inserted subsequently. At the time of his Honour’s decision, r 129 of the UCPR provided that: (1) If service outside Australia of an originating process, a counterclaim or a third party notice is authorised under this part, then parts 1 to 5 apply to the service. (emphasis added) (2) However, nothing in these rules, or in any order of the court made under these rules, authorises or requires the doing of anything in a country in which service is to be effected that is contrary to the law of the country. [82] In the AMCI case, like the present, leave was not required to serve outside the jurisdiction.38 The question was whether informal service could be established under r 117 UCPR. His Honour determined that for r 117 to apply in a case where service would be effected outside Australia, it was necessary for the applicant to show that 34 In Park v Tschannen (2016) 341 ALR 452 at [10]-[11], Edelman J noted that r 10.49 of the Federal Court Rules 2011 (Cth) (Federal Court Rules) may have been inserted because the general rules of substituted service are only concerned with service within the jurisdiction and could not be used to effect service outside the jurisdiction in the absence of an express power to do so. See also Federal Court Rules r 10.45, discussed by Thawley J in Australian Information Commission v Facebook Inc [2020] FCA 531, followed by Moschinsky J in Noco Co v Hong Kong Haowei Technology Co Ltd [2023] FCA 533 at [14]-[18], notwithstanding the express provision for substituted service where it was not practicable to serve the originating application under the Hague Convention: r 10.49 of the Federal Court Rules. 35 Which Jackson J in AMCI Pty Ltd v Corcoal Management Pty Ltd [2013] QSC 50 considered was inserted to overcome the decision of the High Court decision of Laurie v Carroll (1958) 98 CLR 310. 36 Cf UCPR r 123. 37 [2013] QSC 50. 38 AMCI Pty Ltd v Corcoal Management Pty Ltd [2013] QSC 50. -- 21 of 30 -- 22 service was authorised under Chapter 4 part 7, which contained r 124 of the UCPR (now r 125 of the UCPR).39 [83] There is no doubt that the terms of rr 116 and 117 on their face are broad enough to extend to service under Chapter 4 part 7. This may be the case even though, unlike the previous rules which contained r 129, there is not an explicit reference to parts 1- 5 applying to service authorised under part 7. [84] An originating process is to be served personally under r 105. How that is to be effected is provided for under r 106, in relation to an individual, and r 107, in relation to a corporation.40 [85] The question is whether, with the removal of r 129 of the UCPR and the insertion of r 129D, rr 116 and 117 still have application to service abroad or whether they will only apply if they are consistent with the law of the country in which the documents are to be served if personal service has not been effected, given the words “as long as it is served” in r 129D UCPR. [86] In Victoria and New South Wales, similar wording has not been found to prevent the court from making orders with respect to substituted service or informal service.41 A similar provision, however, is found in r 9.07.3 of the High Court Rules 2004 (Cth) and r 10.46 Federal Court Rules 2011 (Cth). [87] As was said by the High Court in Agar v Hyde,42 the starting point even where service involves service overseas are the wordings of the rules themselves, not considerations of matters such as comity. [88] However, that requires careful consideration of the requirements of the rules and rules providing for substituted service should not be used to side-step the requirements of service abroad. As Williams J in Re: Sunnya Pty Ltd stated:43 “Service of process out of Australia is an unusual assertion by the Court of an extra-territorial jurisdiction, with potential international repercussions. That is why service outside of the jurisdiction is carefully controlled by legislation and rules of court, including Part 11 of the UCPR. Whilst the rules in Part 10 of the UCPR permitting substituted service apply to service on defendants outside Australia in proceedings in this Court, those rules are not a means of conveniently side-stepping the limitations that ordinarily apply to service outside Australia. Orders for substituted service of court process outside Australia should only be made in circumstances where service cannot 39 AMCI Pty Ltd v Corcoal Management Pty Ltd [2013] QSC 50 at [14], where his Honour noted that r 117 could otherwise operate as an extension of the authority to serve outside Australia conferred by r 124 in particular proceedings, which he did not consider was likely to be its intended operation. 40 Which for a foreign corporation includes service by leaving it at or sending it by post, telex, facsimile or other similar facility, to the head office, a registered office or a principal office of the body corporate: s 39 Acts Interpretation Act 1954 (Qld) s 39. Statutory Instruments Act 1992 (Qld) s 14(1) applies provisions of the Acts Interpretation Act 1954 (Qld) to the UCPR: Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2005] QSC 389 at [24]. Personal service is also required under rr 208C and 208D. 41 As to substituted service, see Carter Holt Harvey Woodproducts Australia Pty Ltd v David [2015] VSC 393 at [9]-[10] and Capral Ltd v DNV AS [2024] NSWSC 96. 42 (2000) 201 CLR 552 at [39] and [43]. 43 [2023] NSWSC 1104 at [74]. -- 22 of 30 -- 23 practicably be effected in accordance with the relevant rules or legislation.” [89] In my view, given their inclusion in Chapter 4 and the use of broad terms, rr 116 and 117 apply to service abroad. Rule 129B does not preclude such an order being made or require a reading down of those provisions, notwithstanding the use of the words “as long as...”. As was pointed out in the applicant’s supplementary submissions, the use of the word “must” in r 105 of the UCPR has not been construed as precluding service being found to have occurred under r 117 or precluding substituted service under r 116. Those rules provide an exception to personal service where they apply, r 105 being contained in Chapter 4, like r 129D.44 In order for r 116 to apply, it must be shown “it is impracticable to serve a document in a way required under this chapter…” (emphasis added). That must include service in accordance with the law of the country, as is provided for in r 129D of the UCPR or under the Hague Convention if applicable. Similarly, the discretion in r 117 can operate if “a document is not served as required by this chapter…”. [90] A respondent or defendant would have to be otherwise amenable to service abroad under our rules under part 7 of Chapter 4 in order for r 116 and r 117 to have any application.45 Given I am satisfied that the respondents could be served with the originating process without leave of the court under r 125 (if the claim for relief under rr 208C and 208D is otherwise established), I find that rr 116 and 117 of the UCPR can apply to a proceeding abroad if personal service cannot be effected, or in the case of r 116, service cannot be effected in accordance with the law of the country in which the originating process is to be served. In the present case the making of such an order does not appear to be contrary to Texas law and does not offend the rules of international comity.46 [91] I now turn to the question of whether I should be satisfied that informal service has occurred and whether I should exercise my discretion to make an order under r 117 to that effect, or whether the pre-conditions to making an order as to substituted service have been satisfied and the Court should exercise its discretion to make an order for substituted service. [92] Turning to the first matter in relation to the first respondent, which is a company. As his Honour found in AMCI, s 109X of the Corporations Act does not apply to service on a foreign company, however, s 39 of the Acts Interpretation Act 1954 (Qld) does provide a method of service on a corporation under r 107 UCPR.47 [93] Mr Shepherd deposes as to the steps taken to serve Glaucus. He identifies two addresses for Glaucus in Texas that were identified on public documents. One document was a 2021 Franchise Tax Public Information report dated 15 September 2021. The other document was an address for an application for reinstatement and request to set aside revocation or forfeiture dated 14 September 2023 (reinstatement application) and certificate of withdrawal of registration dated 14 September 2023 44 To the extent that rr 208C and 208D of the UCPR provide for personal service, it does not appear to affect the position in respect of service of an originating process abroad, particularly given both provisions are subject to the court ordering otherwise. 45 ASIC v Sweeney (no 2) [2001] NSWSC 477 at [74] ; Re Sunnya Pty Ltd [2023] NSWSC 1104 at [74]. 46 Texas Rules of Civil Procedure r 106(b). 47 AMCI Pty Ltd v Corcoal Management Pty Ltd [2013] QSC 50 at [20]-[24]. -- 23 of 30 -- 24 (withdrawal certificate). On the withdrawal of the registration, an address is provided which is said to be “the address of the principal office of the foreign filing entity” and “[t]he address to which the secretary of state may mail a copy of any process against the foreign entity”.48 The foreign filing entity is identified as Glaucus. A Texas process server attended both addresses and found that the first address no longer existed, the office space being occupied by a law firm. In relation to the second address, he left a copy of the documents at the address which was a residential address and states that an envelope addressed to Matthew Weichert was on the porch. [94] No explanation was provided to the Court as to Texan law or Californian law in relation to identifying a company’s registered address or its principal office. No evidence was placed before the Court at the hearing as to how an address of a corporation is usually recorded and whether at a State or Federal level there is a register of corporations similar to that maintained by ASIC in Australia. There is also some ambiguity as to whether Glaucus is still a registered company, in light of the withdrawal certificate, but absent any explanation it is not a matter which this Court can determine. Given Glaucus is said to be an entity organised under the laws of California, USA, on the withdrawal certificate, no evidence has been provided of whether it is likely Glaucus has a Californian address. Prima facie, service on the principal office of the body corporate is sufficient under s 39 of the Acts Interpretation Act. The address on the reinstatement application and withdrawal application does appear to be a principal place of business, albeit signed by Matthew Weichert, who was said to be the “manager” on the former and an “authorized person” on the latter.49 In any event, it would appear at the time of service there was no evidence that the address was the principal office of Glaucus, which no doubt is the basis of the concession that Glaucus has been personally served is in fact the address of a principal office of the body corporate. [95] Surprisingly, since Glaucus had been served with subpoenas issued in the United States, there was no evidence as to how or where service was effected. [96] In the absence of the above evidence, I am not satisfied it is impracticable to serve Glaucus or that the documents have come into Glaucus’ possession. [97] As to service on the second respondent, Mr Weichert, the affidavit of Mr Shepherd outlines that attempts have been made to effect service by causing the documents to be taken to the addresses: listed by Mr Weichert in a Short Opportunity Fund LPs United States Securities and Exchange Commission Form D dated 16 May 2021 for a company, Bonitas Research LLC (Bonitas), of which Mr Weichert is said to be the Chief Executive Officer; listed on the Glaucus Texas Franchise Tax Public information report dated 15 September 2021; listed on the withdrawal certificate; identified by the Texan process server; 48 MTS-52 to the Affidavit of Michael Shepherd affirmed 5 December 2023. 49 MTS-51 and MTS-52 to the Affidavit of Michael Shepherd affirmed 5 December 2023. -- 24 of 30 -- 25 of the firm of Mr Weichert’s father, David Weichert, who previously acted for his son as well as Glaucus in a discovery application brought by Blue Dog in the United States; and at the address of Bonitas, listed as contact details on its webpage, including sending the documents to the email address listed on the webpage. [98] Mr Weichert was not at any of the addresses attended by the process servers engaged on behalf of Blue Dog. Mr Weichert’s wife was apparently at an address at Manana St, Austin (Manana address). According to the process server, she stated her husband was in Argentina but was authorised to accept service on Matthew’s behalf. She refused to accept service of the documents after phoning David Weichert. David Weichert informed the process server and Blue Dog’s legal representatives that he was not authorised to accept service of the Australian proceedings on behalf of either Matthew Weichert or Glaucus, even though he had previously acted for his son Matthew and Glaucus in the US discovery proceedings. Notwithstanding this advice, the documents were left at the reception of David Weichert’s firm. He informed Blue Dog’s representatives by email that he had not retrieved the boxes. He also stated that, in relation to a second set of documents left at the Texas residence with Matthew’s wife, she was not an agent of Glaucus nor authorised to receive documents on behalf of Matthew. [99] It is plain as conceded by Blue Dog from the evidence that personal service was not effected upon Matthew Weichert. [100] Blue Dog contends that the Court should infer that the documents have come to the attention of Glaucus and Matthew Weichert, particularly given the contact made with David Weichert who formerly had acted for them in the subpoena proceedings and is Matthew’s father but stated he did not act for Glaucus or Matthew Weihert in relation to any matter in Australia. There is no doubt David Weichert was aware of the fact that the documents related to Australian proceedings and it may be reasonably inferred that he told Matthew Weichert that there were attempts to serve him with such proceedings. However, given his emails to Blue Dog’s legal representatives, it is not reasonable to infer that the documents came into Matthew or Glaucus’ possession or to their attention. [101] As was observed by Jackson J in AMCI,50 the fact that the Court is exercising jurisdiction under the provisions of Chapter 4 part 7 is a relevant factor to take into account in determining whether, as a matter of discretion, informal service should be ordered under r 117 of the UCPR. [102] I am not satisfied that the documents in question have come into possession of Matthew or Glaucus such that the Court is persuaded that an order should be made under r 117 of the UCPR. [103] As to the question of substituted service, Blue Dog seeks orders that service had occurred on the happening of the last attempt of service on Glaucus and Matthew Weichert under r 116(3) of the UCPR, notwithstanding no prior order was sought from the Court for substituted service. Blue Dog contends that r 116 is not limited in its operation and can be ordered to have occurred where the Court is otherwise 50 AMCI Pty Ltd v Corcoal Management Pty Ltd [2013] QSC 50 at [31]. -- 25 of 30 -- 26 satisfied that it is impracticable to serve a document in a way required under Chapter 4. Counsel for Blue Dog submitted that such orders should be made on the basis that it appears that Glaucus and Matthew Weichert were seeking to avoid service, particularly given the uncooperative approach adopted by David Weichert, who had previously acted for Glaucus and Matthew Weichert. In any event, Blue Dog submits the Court does not need to go that far and the evidence supports the fact that it is impracticable to serve Glaucus and Matthew personally given the attempts made. [104] According to Wilson J in Kendell v Sweeney,51 it is not enough to show the method of service proposed would be effective in bringing the proceedings to the attention of those so served. It must first be shown that it is impracticable to serve the documents as prescribed by the rules. That accords with r 116(1) of the UCPR, which is a precondition to the making of the order. [105] As to whether it is impracticable to serve Glaucus or Matthew Weichert, Tamberlin J in Ricegrowers Co-Operative Ltd & Seatide Pty Ltd v ABC Containerline NV & MED Containerline Antwerp NV52 stated, albeit in the context of the Federal Court rules, that there should be evidence of some attempt made to effect service in accordance with the rules or there should be evidence led that it is so obviously futile as to not warrant an attempt at service. It may however be made in other circumstances.53 [106] The applicant did seek to identify addresses through which it could personally serve Matthew Weichert. It seems likely that the Manana address identified by the Texas process service was his residential address, given the person who is thought to be his wife was there and she stated Matthew Weichert was in Argentina. As to whether the other addresses were current,the position is unclear. There was an envelope on the porch of the residence at the address listed for Bonitas and on the withdrawal form for Glaucus addressed to Matthew Weichert, but there was no other evidence that the address was current, save it was listed on the forms in September 2023. At least on the search from the process server it did not appear to be a current address being referred to as an address from 3 March 2020 until 13 July 2021.54 The evidence of Mr Shepherd does, however, satisfy me that the Bonitas email address is still active, and that Matthew Weichert is the Chief Executive officer of Bonitas. [107] I am presently not satisfied on the evidence that Glaucus and Matthew Weichert are seeking to deliberately evade service, although I do accept from the communications by David Weichert that they will not assist in facilitating service. David Weichert’s attitude is non-co-operative in terms of service, the response must be seen in the wider context of the Glaucus Parties having been issued with subpoenas and having had them set aside successfully. There is however also evidence that Matthew Weichert and Bonitas failed to engage in another Australian case in 2020; 55 in an email excerpted in the judgment, Matthew Weichert said, “Australian courts have no jurisdiction over us…”. At least in the United States, however, the attempts by Blue 51 [2002] QSC 404. 52 (1996) 138 ALR 480 at 482. 53 Ford, Re Careers Australia Group Ltd (in Liq) v Mansfield [2022] FCA 173 at [14]-[16]. 54 MTS-54 to the Affidavit of Michael Shepherd affirmed 5 December 2023 at page 52. 55 Rural Funds Management Ltd as responsible entity for Rural Funds Management Limited as Responsible Entity for the Rural Funds Trust and RF Active v Bonitas Research LLC [2020] NSWSC 61 at [25]. -- 26 of 30 -- 27 Dog to issue subpoenas on the Glaucus Parties were strongly defended, but that does not indicate Mr Weichert will be amenable to proceedings in Australia.56 [108] I infer that Matthew Weichert was at least aware of the attempts to serve Matthew Weichert and to communicate with him. These attempts have not resulted in any response, despite the fact I infer Michael Weichert was at least being aware that Blue Dog was seeking to serve documents upon him and Glaucus through his father and Ms Fallon, as well as through Bonitas. I am presently satisfied it is impracticable to serve Matthew Weichert personally given the attempts that have been made to serve him to no avail and the fact that no information has been forthcoming from him or those closest to him as to when or where he could be served. [109] As to whether it is impracticable to serve him in accordance with the laws of Texas, there was no evidence before me as to the position in Texas save for a submission that the law of Texas was the same as Queensland in requiring personal service of an originating process. After the Court requested further submissions as to whether it was open to make orders under rr 116 and 117, in light of r 129D, the applicant sought leave to provide further evidence as to the service laws in Texas to demonstrate that service was not practicable either through personal service or through the permissible mode of service under the laws of Texas. According to the further submissions, the applicant, by acknowledging Texas law required personal service and not something less stringent, had sought to concede it had not complied with r 129D. The applicant sought to reopen the evidence and to provide evidence of the law of Texas, in order to show that the alternative method of service would at least be impracticable. [110] I have determined to allow the further affidavit to be filed and read, and I considered the submissions as to methods of service in Texas. [111] The justification for not providing evidence regarding the law as to service in Texas is rather tenuous, although I accept that Blue Dog’s lawyers did not turn their minds to whether it was necessary to provide such evidence until the Court required further submissions, notwithstanding that r 129D is clear in its terms in providing that, if personal service is not possible, then service may occur in accordance with the law of the country in which the document is to be served. However, it is relevant to deciding the present application, so I allowed it. [112] I am satisfied that it would be impracticable to serve Matthew Weichert through an alternative mode of service available under Texan law, namely, to serve by mailing the documents to a defendant (or respondent in this case) by registered and certified mail with a return receipt requested. According to that evidence, if there is not a return receipt there is no effective service under Texan law. [113] Effecting service through the Texan method is simple given there is evidence that Matthew Weichert is residing at the Manana address, however, requiring a receipt means, in my view, this method of service is untenable. While I do not accept that it is more onerous than personal service requirements under the law of Queensland, I do accept that, given Matthew Weichert’s lack of co-operation to date, seeking to serve him through the post and requiring a receipt will prove futile. I am satisfied that the applicant, despite not having attempted to serve Matthew Weichert in accordance with the law of Texas, has demonstrated it is impracticable to serve Matthew Weichert in 56 MTS-25 to the Affidavit of Michael Shepherd affirmed 17 November 2023 at pages 1069 and 1071. -- 27 of 30 -- 28 accordance with those laws particularly in the context of seeking to serve an application, particularly where there are apparently issues of time limitations accruing in relation to the actions which Blue Sky intends to bring. [114] I was referred to a judgment involving Matthew Weichert and a company with which he is associated, Bonitas, and the judgment records they were served with the proceedings in accordance with the Hague Convention.57 This is surprising in circumstances where no evidence was provided as to the application of the Hague Convention. However, having reviewed the provisions for service under the Hague Convention in division 3 of Part 7, I have satisfied myself that even if the provisions applied it would not be practicable to serve using that method for this application given the timeframes involved. That is not to suggest that would be the case in relation to service in the future. [115] I am not prepared, however, to make an order that service has already been effected under r 116 of the UCPR, even if the rule permits such an order, which I presently don’t need to decide. I am, however, prepared to make an order for substituted service whereby the documents will be deemed to be served if: delivered to the office of David Weichert; mailed to the office of David Weichert delivered to the Manana address; mailed to the Manana address using registered or certified email; and sent by email to Bonitas at the email address identified by Mr Shepherd, together with a copy of the Court order providing for substituted service. [116] For the reasons set out above, I am satisfied these avenues would bring the documents to Matthew Weichert’s attention.58 While these methods have been previously used to serve Matthew Weichert, given he is outside the jurisdiction and no doubt acting under the apprehension that service has not occurred, it is appropriate for him to be re-served with the benefit of a Court order informing him that service through those methods will be deemed to be service notwithstanding the lack of personal service or lack of a receipt. The applicant can submit an order to me providing for substituted service by those various methods of service with the documents being taken to have been served within five days after the last method of service has been carried out. [117] As outlined above, no evidence has been provided as to the system of registration of companies in California or Texas, or whether there is a register maintained of a registered office or principal place of business. I am asked to assume that to be the case. There is also a question on the evidence before me as to whether the company remains registered for service to occur at all, given the withdrawal form of 14 September 2023. Although, without further explanation, it does not permit me to draw a conclusion either way. It may be that such evidence can be obtained, but without that evidence the Court cannot be satisfied that it is impracticable to serve Glaucus. Notwithstanding David Weichert is aware of the proceedings, I am not satisfied the 57 Rural Funds Management Ltd as responsible entity for Rural Funds Management Limited as Responsible Entity for the Rural Funds Trust and RF Active v Bonitas Research LLC [2020] NSWSC 61 at [25]; MTS-25 to the Affidavit of Mr Shepherd affirmed 17 November 2023 at page 1088. 58 And appears to be consistent with that provided in r 106(b) of the Texan Civil Procedure Rules. -- 28 of 30 -- 29 documents are in the possession of Glaucus, sufficient to establish informal service has occurred and therefore an order under r 117 of the UCPR should be made. Nor on the basis of the present evidence am I satisfied an order should be made pursuant to r 1116 of the UCPR on the basis it is impracticable to serve Glaucus. It may be, with further evidence, the applicant can establish that to be the case. [118] If applications are being made to serve people or corporations extraterritorially, parties should address the available avenues of service and why it is impracticable to serve using those methods. As has been noted in a number of authorities, substituted service is not to be used simply to avoid the service processes required to serve someone extraterritorially. At present, Blue Dog has not done enough to establish service against Matthew Weichert or Glaucus. I note, however, that Blue Dog may face time difficulties in relation to potential claims. It is evident, however, Blue Dog has been aware for a considerable period of time of the fact short-selling occurred. In newspaper articles in 2018, complaints were being raised in relation to Glaucus’ conduct.59 Further, Blue Dog sought to issue subpoenas in the United States last year which were set aside, with the court rejecting that proceedings in Australia were within reasonable contemplation of Blue Dog.60 [119] As I am not satisfied that Matthew Weichert or Glaucus has been served, it is unnecessary for me to consider whether rr 208C and 208D of the UCPR have been satisfied and an order should be made against them. The application for Glaucus should be adjourned. Orders [120] The orders of the court are that: 1. The fourth and fifth respondents produce to the applicant, by 26 March 2024, trading records and confirmations recording any transactions executed by the fourth and fifth respondents during the period from 20 March 2018 to 28 March 2018 (inclusive) in the following: a. Blue Sky Alternative Investments Limited (BLA) shares; or b. derivatives or other financial products used to take a short position in respect of BLA shares, save that relate to the fourth and fifth respondents engaging in such transactions on their own behalf and transactions by Totus Capital Day Ltd (as trustee for the Totus Alpha Fund). 2. The third respondent produce to the applicant by 26 March 2024 all documents recording any individual or entity, other than with respect to the 59 See MTS-25 to the Affidavit of Mr Shepherd affirmed 17 November 2023 at page 1082. 60 MTS-25 to the Affidavit of Mr Shepherd affirmed 17 November 2023 at page 1088. -- 29 of 30 -- 30 fourth and fifth respondents and Totus Capital Day Ltd (as trustee for the Totus Alpha Fund), that: a. received a draft of the Report prior to publication; b. discussed the Report with the third respondent prior to its publication; or c. was aware that a report would or may be published by the first respondent in relation to BLA, in the period from 1 October 2017 to 28 March 2018 (inclusive). 3. The application against the first and second respondents be adjourned. 4. That the applicant provide to Associate Brown J a draft order providing for substituted service of the second respondent in accordance with the reasons by 10.00 am on 16 March 2024, which will be made on the papers if her Honour is satisfied as to the terms of the order. 5. Liberty to apply on three days’ notice. -- 30 of 30 --