In the first day of trial in Keybridge’s lawsuit against Bell Potter over the alleged 2015 Molopo offer, NSW Supreme Court Justice Kelly Rees was told Bell Potter made an agreement on April 27, 2015 for its client to buy the investment group’s holding in Molopo Energy at 25 cents per share.

Counsel for Bell Potter, Jason Potts SC, said during cross-examination of Bolton that the alleged binding agreement was made during a phone call that only lasted one minute and 18 seconds while the managing director drove from Sydney airport to the Keybridge Capital office.

“It was certainly a brief call,” Potts said.

“You can get a lot done in one minute and 18 seconds,” Bolton replied.

“I clarified if it was a firm bid and he confirmed he was bidding firm…I’m very clear about this particular matter.”

A “firm” bid in stockbroking circles meant the buyer was entering a binding agreement to purchase the shares, Bolton said.

Keybridge filed its claim against Bell Potter in the NSW Supreme Court in July last year as the Molopo board brought claims against former executives over alleged breaches of directors duties. Molopo was delisted in April last year.

Bell Potter argues that Keybridge only offered to sell its shares, comprising 16.58 per cent of Molopo Energy, to Bell Potter’s client and that here was no binding agreement.

On Monday, Bolton said he did not formally hold a board meeting to approve the transaction but asked board members for approval by text message “in the form  that Keybridge conducted at that time”.

“I believe I had approval for the sale…whether or not a formal circular was drafted or not is somewhat academic to our procedure at the time,” said Bolton.

Potts also questioned whether Bolton had authority to bind Keybridge to the transaction, saying it was company policy that it needed board approval for investments over $5 million.

While there were no documents showing the company granted him authority to sell the shares, Bolton claimed the chief investment officer gave him “verbal authority to transact” and sent an email confirming the purchase.

“If you had truly believed you had entered into a binding agreement, you would have been obliged to disclose to ASX immediately,” said Potts.

Bolton disagreed that Keybridge had to immediately disclose the offer, saying the company would have notified the market once it no longer held the stake in Molopo.

Bolton ‘deliberately’ omitted telling court about disqualification

Also in cross-examination, Potts said the Australian Securities and Investments Commission disqualified Bolton from managing corporations for three years in November 2015 after his alleged involvement in the failure of 13 different companies.

An AAT delegate said in deciding Bolton’s appeal of his disqualification that he lodged documents with the Australian Taxation Office which were false and did not seek legal advice, Potts said.

Bolton said he “strongly disagreed” with allegations that he lodged false documents with the ATO and has appealed the disqualification, which is still pending, the Keybridge managing director said.

Potts claimed Bolton did not tell the court about his disqualification because he did not “want to undermine the impression that [he is] an experienced and active investor”.

“You deliberately chose to refrain from telling the court about the ASIC disqualification, didn’t you?” Potts said.

“It wasn’t relevant,” Bolton replied.

Bolton grilled on memory of ‘precise words’ in call seven years ago

Also on Monday, Potts questioned if Bolton could remember the specific words spoken during his telephone calls with Shallard in April 2015.

“You don’t say you can remember the precise words used in calls some seven years ago, do you?” Potts said.

“Yes, this was an important call. I recall the details,” Bolton replied.

Bolton agreed he did not make contemporaneous notes of his phone conversations with Shallard in April 2015, except for messages to his colleagues.

Bolton claimed he confirmed in the call that it was a “firm bid” and said he would take it to the board.

Case centres on whether ‘firm’ bid referred to in phone call

Counsel for Keybridge, Andrew Broadfoot QC, said Monday that Shallard referred to a “firm” bid by Bells Potter’s client, which meant there was a binding agreement to buy the Molopo shares.

Broadfoot argued there was evidence of Bolton consulting with Keybridge directors by text message to consider the offer.

“On our case an agreement is formed on 27 April and anything that needs to happen subsequently does not prevent a contract coming into existence,” said Broadfoot.

Bolton told Bell Potter senior equities dealer, Brad Shallard, that he needed a “firm bid” to take to the board, said Broadfoot.

But on Shallard’s version of events, the Bell Potter equities manager made clear from the beginning that there was no deal until Keybridge had opened accounts with Bell Potter to complete the transfer, the barrister said.

Bolton is no stranger to controversy surrounding his businesses.

In December 2015, he was disqualified by ASIC from acting as director of companies for three years, following his involvement in the failure of 13 companies, including firms related to Australian Style Holdings. More than $25 million was owed to creditors in the collapse of these companies.

His disqualification ended in November 2018, after which Bolton returned as chief executive of Keybridge alongside Perth investor Farooq Khan.

Keybridge  purchased Aurora Funds Management from Aurora Funds in January 2015 for $4.3 million. At that date, Aurora Funds Management had $180 million in retail funds under management.

A lawsuit was filed by Keybridge against Aurora Group in July 2019 in the Supreme Court of Western Australia in a dispute over the share sale agreement entered into during this acquisition.

In 2017, both Aurora and Keybridge sought to replace three Molopo directors with individuals that they had nominated. Molopo is what is known as a ‘cash box’ with $67.5 million of cash reserves and little else. The firm is involved in assessing opportunities in the oil and gas sector.

Around the time of the failed takeover bid, Aurora held almost 18 per cent of shares in Molopo while Keybridge held just under 20 per cent.

With ASIC raising concerns about the bid to replace Molopo’s directors in April 2017, the matter went to the Takeovers Panel.

An initial decision by the Panel found that while Aurora and Keybridge were not associates, the takeover was still unacceptable because of the “substantial influence” of Nicholas Bolton, who allegedly controlled the investment strategies behind both firms.

An internal review led to a second decision, in which the panel found that Aurora and Keybridge were “associates” and that Bolton’s influence behind the scenes made the bid unacceptable.

Keybridge is represented by Andrew Broadfoot QC and Lindy Barrett. Bell Potter is represented by Jason Potts SC and Mark Lawson.

The case is Keybridge Capital Limited v Bell Potter Securities Limited.

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