Former Quintis managing director Frank Wilson.

Judge surprised by Wilson's lack of knowledge

Monday, 10 September, 2018 - 15:46
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The Supreme Court has dismissed a defamation claim brought by former Quintis managing director Frank Wilson, after the trial judge said he was surprised by Mr Wilson's asserted lack of knowledge of the sandalwood producer’s contracts.

In a lengthy interlocutory judgement handed down on Friday, Justice Kenneth Martin struck out the statement of claim against the company’s directors, including Julius Matthys, Dalton Gooding and John Groppoli, but allowed Mr Wilson to replead.

The action stemmed from two ASX announcements made by Quintis in mid 2017, concerning cancellation of a supply contract held by Quintis subsidiary Santalis.

The announcements came nearly six months after the contract, to supply pharmaceutical-grade sandalwood to a subsidiary of Nestlé Corporation (Galderma), was cancelled.

Mr Wilson, who was represented by Bennett & Co, insisted he did not know about the contract cancellation.

Mr Wilson's asserted lack of knowledge is, on the face of it, somewhat surprising,” Justice Martin wrote in his judgement. 

“If anyone in the Quintis organisation should have known about a consensual termination of a supply contract held by a wholly-owned Quintis subsidiary, then surely Mr Wilson, as managing director of Quintis at the time, would be expected to have known. 

Mr Wilson was also at that time one of two Quintis directors who also sat as appointed directors of ... Santalis Pharmaceuticals. 

Mr Gooding was also a director of Santalis. 

“Yet Mr Wilson's whole case is built on his declared stance that he knew nothing of these contract termination events with Santalis and that not to accept his denial assertion at face value defames him.”

Justice Martin explained that Mr Wilson’s claim rested upon the ‘true innuendo’ meanings arising from the two ASX announcements.

“To summarise then in what is an unusual series of defamation grievances, Mr Wilson starts at his factual premise that he did not know anything about these overseas events," Justice Martin said.

“He then suggests the two challenged publications will be read to contend to the contrary - namely, that he did know of the supply contract termination events. 

“Even that position, by itself, is not enough to harm his reputation. More is needed. 

“It is found in the extra knowledge, he argues, of sophisticated readers of the financial media - who he says would know of ASX market disclosure obligations incumbent upon directors of publicly listed companies, particularly upon managing directors. 

“Hence, it is, in the end, the combination of the published text conveying or suggesting his affirmative knowledge of such events plus the extra knowledge held by some readers, that together generates true innuendo pejorative meanings which impacted against his reputation, or so he argues.”

Justice Wilson said the two ASX announcements were carefully worded and spoke only of the lack of knowledge of the 'current' board of Quintis about the termination events.

“They said nothing at all about the state of Mr Wilson's knowledge - as the former managing director of Quintis,” Justice Martin concluded. 

“An adverse level of meaning against Mr Wilson on the issue of his knowledge can only be reached by reading between the lines, if it is fair and reasonable to do so,” he added.

“The analysis invariably reverts to the starting enquiry about what the two publications say, when fairly read, about Mr Wilson's knowledge on this issue. They say nothing about it at all.”

In dismissing the claim, Justice Martin Martin said there should be an opportunity to re-plead.

“But any amendment would need to squarely confront the problematic plenary issue about the state of Mr Wilson's knowledge," Justice Martin said. 

“On the face of it that looks to be a confronting hurdle to overcome.” 

Business News notes this was an interlocutory hearing without any evidence and the decision was based purely on pleadings with no findings on Mr Wilson's knowledge or lack thereof.  

The court ruling comes three months after the Australian Securities and Investment Commission started civil proceedings against Mr Wilson for failing to complete his duties as a director.

Asic claims that Mr Wilson knew about the contract cancellation in early 2017 but did not disclose the information to the board until May.

It also alleges that when Quintis responded to an ASX query in March last year, Mr Wilson allowed the company to release misleading information in relation to the status of the Galderma agreements.

“Asic is seeking against Mr Wilson declarations of contravention, civil penalty orders and an order prohibiting Mr Wilson from managing corporations for such period as the court thinks fit,” Asic said.

Meanwhile, McGrathNicol is moving towards completion of a scheme of arrangement with secured creditors of Quintis.

Under the scheme, up to $175 million would be injected into the debt-laden business but leave shareholders of the listed company with no return.

McGrathNicol partner Shaun Fraser said he was highly confident the scheme would gain the requisite backing from more than 75 per cent of secured creditors, which include US investment group BlackRock.

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