X Corp v eSafety Commissioner

Case [2024] FCA 1159

FEDERAL COURT OF AUSTRALIA

X Corp v eSafety Commissioner [2024] FCA 1159

File number: VID 956 of 2023
Judgment of: WHEELAHAN J
Date of judgment: 4 October 2024
Catchwords:

PRIVATE INTERNATIONAL LAW — Online Safety Act 2021 (Cth) ss 56(2), 57 – where the eSafety Commissioner issued a notice to Twitter Inc under s 56(2) of the Online Safety Act on 22 February 2023 (the reporting notice), requiring a response by 29 March 2023 – where Twitter Inc merged into X Corp on 15 March 2023, and thereupon ceased to exist – where X Corp sought a declaration that it was not obliged to respond to the reporting notice – whether X Corp was obliged to respond to the reporting notice – in the case of a foreign corporation, it is necessary to refer to foreign law to identify the juristic status of the “person” on whom s 57 of the Online Safety Act operates – s 7(3)(a) of the Foreign Corporations (Application of Laws) Act 1989 (Cth) directs attention to the law of Nevada, as the law of the place where X Corp is incorporated, to decide questions about the “status” of X Corp – the law of Delaware, the place where Twitter Inc was incorporated, is not selected by s 7(3)(a) – an aspect of the “status” of X Corp pursuant to Nevada law is that it is subject to all of the “liabilities” to which Twitter Inc was subject before the merger – the term “liabilities” in the relevant Nevada law is broad enough to encompass non-pecuniary regulatory obligations – X Corp was required to respond to the reporting notice.

ADMINISTRATIVE LAW — where X Corp was issued with an infringement notice under the Regulatory Powers (Standard Provisions) Act 2014 (Cth) (Regulatory Powers Act) – where X Corp sought a declaration that the infringement notice was invalid because it did not specify the geographical location where the conduct constituting the alleged contraventions took place – s 104(1)(e)(iii) of the Regulatory Powers Act requires an infringement notice to specify the geographical location of where the conducting constituting the alleged contraventions took place – Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 and Minister for Immigration and Citizenship v SZIZO [2009] HCA 37; 238 CLR 627, applied – it was not a purpose of the legislation to invalidate an infringement notice where the omission of the place of the contravention could not lead to prejudice – there was no prejudice to X Corp by the omission of the place of the alleged contraventions from the infringement notice – the infringement notice was not invalid for non-compliance with s 104(1)(e)(iii) – declaration refused.

ADMINISTRATIVE LAW — where X Corp challenged the validity of the infringement notice on the basis that X Corp had been allowed additional time within which to respond to the reporting notice – whether, pursuant to s 56(2)(c)(ii) of the Online Safety Act, the…

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X Corp v eSafety Commissioner [2024] FCA 1159
Case
[2024] FCA 1159
Decision Date

CaseChat Overview and Summary

The plaintiff, X Corp, brought proceedings against the eSafety Commissioner, challenging the validity of a reporting notice and an infringement notice issued under the Online Safety Act 2021 (Cth) and the Regulatory Powers (Standard Provisions) Act 2014 (Cth). X Corp argued it was not required to respond to the reporting notice as it had merged with Twitter Inc prior to the due date for the response, and that the infringement notice was invalid as it did not specify the geographical location of the alleged contraventions. The Commissioner argued that X Corp was required to respond to the reporting notice and that the infringement notice was valid.

The court had to determine whether X Corp was required to respond to the reporting notice and whether the infringement notice was invalid due to the omission of the geographical location of the alleged contraventions. The court found that X Corp was required to respond to the reporting notice as it was subject to all of the "liabilities" to which Twitter Inc was subject before the merger, including non-pecuniary regulatory obligations. The court also found that the infringement notice was not invalid as there was no prejudice to X Corp by the omission of the place of the alleged contraventions from the infringement notice.

The court found that X Corp had failed on all its claims. The proceeding was dismissed with costs.

The court's reasoning was based on the application of foreign law to determine the status of X Corp and the effect of the merger on its liabilities. The court also relied on the principles established in Project Blue Sky Inc v Australian Broadcasting Authority and Minister for Immigration and Citizenship v SZIZO in determining the validity of the infringement notice.

Orders

Orders of the court

1. The proceeding is dismissed.

2. The applicant pay the respondent’s costs of the proceeding.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Under s 105 of the Regulatory Powers Act, a person to whom an infringement notice has been given may apply for an extension of the 28-day period for payment referred to in s 104(1)(h) of the Act. If an application is made before the end of that 28-day period, then the relevant chief executive may extend the period, and may extend the period before or after the end of the period.Further backgroundInteractions between the Commissioner, Twitter Inc, and X Corp On 13 February 2023, the Commissioner’s office provided a notice in draft to Twitter Inc. The Commissioner’s office requested confirmation that Twitter Inc was the appropriate legal entity for service of the notice, as well as the name and contact details of the individual to whom the notice should be directed. In response, on 16 February 2023, Twitter Inc advised the office of the Commissioner by email that it was the appropriate legal entity, and that the notice should be sent to Justin Quill. Mr Quill is a member of the firm Thomson Geer, the solicitors currently acting for X Corp. On 22 February 2023, the office of the Commissioner sent an email to Mr Quill that attached the Commissioner’s notice under s 56(2) of the Act. The covering email to Mr Quill stated that Twitter Inc was required to comply with the relevant notice within 35 days, and no later than 17:00 Australian Eastern Daylight Time on 29 March 2023, or a later date if agreed by the Commissioner. Mr Quill responded by email the following day, stating that Twitter Inc would send its response in due course. The notice had the following features –(a)the notice was given under cover of a letter addressed to Twitter Inc, care of Mr Quill;(b)the notice itself was directed to Twitter Inc;(c)the cover page of the notice included the following text –This non-periodic reporting notice (Notice) is given to you under section 56(2) of the Online Safaty [sic] Act 2021 (Cth) (the Act) in respect of the following service that you provide in Australia:1.Twitter, being a ‘social media service’ within the definition of section 13 of the Act.You are required to prepare a report about the extent to which you complied with the applicable basic online safety expectations specified in Schedule A from 24 January 2022 to 31 January 2023 inclusive (Report Period).The report must include answers to the questions specified in Schedule B, and use the template provided.You are required to give the report to the Commissioner within 35 days of being given this notice (being no later than 17:00 Australian Eastern Daylight Time on 29 March 2023) or within such longer period as I allow if I am contacted by you with a request for extension.The report is to be given to the Commissioner by email to [address]@esafety.gov.au … A copy of Schedule B to the notice was not tendered, but the response to the reporting notice was. It can be inferred from the response that Schedule B contained 31 numbered questions, which themselves included sub-questions. Most of the questions were expressed to enquire about present states of affairs. One question, namely Question 9, was directed to the “reporting period”.

Evidence

Evidence Before The Court

In written submissions, the Commissioner submitted in the alternative that X Corp had represented to the Commissioner that X Corp was the appropriate entity to respond to the notice and that the Commissioner had relied on that representation. It was submitted that as late as 15 October 2023, when X Corp provided its submissions to the Commissioner concerning the withdrawal of the infringement notice, X Corp had not referred to the merger with Twitter Inc as some kind of exculpatory consideration. In these circumstances, it was submitted that X Corp is appropriately said not to have complied with the reporting notice that was given to Twitter Inc. This line of argument was not developed at the hearing.The expert evidence as to foreign law Two United States practising attorneys gave evidence. Counsel for X Corp adduced evidence from Mr I Scott Bogatz, an attorney practising in commercial business law in Las Vegas, Nevada. Mr Bogatz produced a report that was received into evidence, subject to some limitations on its use that were the subject of a direction under s 136 of the Evidence Act 1995 (Cth). The limitations related to aspects of the report which appeared to go beyond the role of the expert in identifying the relevant content of foreign law and which encroached upon the question before the Court, namely the application of s 56(2) of the Online Safety Act to X Corp: see Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No 6) (1996) 64 FCR 79 at 82–3 (Lindgren J), cited in Neilson v Overseas Projects Corp of Victoria Ltd [2005] HCA 54; 223 CLR 331 at [120] (Gummow and Hayne JJ). Counsel for the Commissioner adduced evidence from Alexander Hugh Pyle, an attorney practising in corporate mergers and acquisitions in Boston, Massachusetts. Mr Pyle produced a report and a supplementary report. While no objections were made to his reports, questions arise in relation to the weight to be given to some aspects of his opinions, which went beyond the role of an expert in identifying the content of the relevant foreign law. It must be said that noting the encroachment by Mr Bogatz and Mr Pyle in their written reports into issues that went beyond their role as experts on the content of foreign law is no criticism of them. The questions that they were asked in the instructions given to them invited them to take this course. Both experts were cross-examined. I observed them give their evidence. Mr Bogatz gave evidence in the courtroom. My Pyle gave evidence by video link. Senior counsel for the Commissioner adduced evidence from the experts concurrently, which was in accordance with directions that I had made prior to the hearing. Senior counsel for X Corp took a traditional approach, choosing to cross-examine Mr Pyle in the conventional way, albeit in the presence of Mr Bogatz who remained in the witness box. There was no re-examination of Mr Bogatz. As I have mentioned, Twitter Inc was incorporated under the laws of Delaware. Mr Bogatz gave evidence that because the merger occurred under Nevada law, Twitter Inc ceased to exist pursuant to Nevada law, in accordance with the terms of the merger agreement. Mr Pyle gave evidence that because Twitter Inc was incorporated under the laws of Delaware, and X Corp was incorporated under the laws of Nevada, the legal effect of the merger of Twitter Inc into X Corp was governed by both the Delaware General Corporation Law and the laws of Nevada.

Decision

Reasons for decision

Ultimately, Goodman has nothing to say about the issue that is before the Court on this application. Even concerning the requirements that were to be satisfied by an information under the laws governing summary offences in Victoria at that time, Goodman is doubtful authority. It does not support the large proposition for which it was cited by X Corp, namely that at general law, where there is a charge for an offence, the place of that offence must be specified. Accordingly, nothing said in Goodman affects my analysis concerning the proper construction of s 104(1)(e)(iii) of the Regulatory Powers Act which is resolved by reference to the principles essayed in Project Blue Sky and SZIZO.Conclusions X Corp has failed on all its claims. The proceeding will be dismissed with costs.

Ratio Decidendi

Legal Principle Established

Section 259 of the Delaware General Corporation Law relevantly provides –§ 259. Status, rights, liabilities, of constituent and surviving or resulting corporations following merger or consolidation(a) When any merger or consolidation shall have become effective under this chapter, for all purposes of the laws of this State the separate existence of all the constituent corporations, or of all such constituent corporations except the one into which the other or others of such constituent corporations have been merged, as the case may be, shall cease and the constituent corporations shall become a new corporation, or be merged into 1 of such corporations, as the case may be, possessing all the rights, privileges, powers and franchises as well of a public as of a private nature, and being subject to all the restrictions, disabilities and duties of each of such corporations so merged or consolidated; and all and singular, the rights, privileges, powers and franchises of each of said corporations, and all property, real, personal and mixed, and all debts due to any of the said constituent corporations on whatever account, as well for stock subscriptions as all other things in action or belonging to each of such corporations shall be vested in the corporation surviving or resulting from such merger or consolidation; and all property, rights, privileges, powers and franchises, and all and every other interest shall be thereafter as effectually the property of the surviving or resulting corporation as they were of the several and respective constituent corporations, and the title to any real estate vested by deed or otherwise, under the laws of this State, in any of such constituent corporations, shall not revert to be in any way impaired by reason of this chapter; but all rights of creditors and all liens upon any property of any of said constituent corporations shall be preserved unimpaired, and all debts, liabilities and duties of the respective constituent corporations shall thenceforth attach to said surviving or resulting corporation, and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it.(Emphasis added.) In addition, s 261 of the Delaware General Corporation Law provides –§ 261. Effect of merger upon pending actions.Any action or proceeding, whether civil, criminal or administrative, pending by or against any corporation which is a party to a merger or consolidation shall be prosecuted as if such merger or consolidation had not taken place, or the corporation surviving or resulting from such merger or consolidation may be substituted in such action or proceeding.The Nevada statute The relevant Nevada provision is § 250(1) of Chapter 92A of the Nevada Revised Statutes (NRS), which provides –92A.250  Effect of merger, conversion or exchange.1. When a merger takes effect:(a) Every other entity that is a constituent entity merges into the surviving entity and the separate existence of every entity except the surviving entity ceases;(b) The title to all real estate and other property owned by each merging constituent entity is vested in the surviving entity without reversion or impairment;(c) An owner of a constituent entity remains liable for all the obligations of such constituent entity existing at the time of the merger to the extent the owner was liable before the merger;(d) The surviving entity has all of the liabilities of each other constituent entity;(e) A proceeding pending against any constituent entity may be continued as if the merger had not occurred or the surviving entity may be substituted in the proceeding for the entity whose existence has ceased;(f) The articles of incorporation, articles of organization, certificate of limited partnership or certificate of trust of the surviving entity are amended to the extent provided in the plan of merger; and(g) The owner’s interests of each constituent entity that are to be converted into owner’s interests, obligations or other securities of the surviving or any other entity or into cash or other property are converted, and the former holders of the owner’s interests are entitled only to the rights provided in the articles of merger or any created pursuant to NRS 92A.300 to 92A.500, inclusive.The opinions of Mr Bogatz