Setback for Victoria’s venture capital fund in unfair dismissal case

Victoria’s $2bn venture capital fund has failed to get a legal claim against it thrown out of court, but a scientist will have to update his claims against it.

Scott Morrison tours the Seer medical facility in Melbourne in 2021. Picture: NCA NewsWire / David Crosling

Victoria’s $2bn venture capital fund has failed to get a legal claim against it thrown out of court.

Breakthrough Victoria is now facing fresh claims from Dean Freestone, a scientist and co-founder of med-tech start-up Seer, which developed at-home epilepsy monitoring equipment.

Federal Court judge Shaun McElwaine dismissed a request from lawyers representing Breakthrough Victoria and executive Sally McCutchan to throw out the unfair dismissal case entirely, but told Dr Freestone to update his claim against them because it failed to comply with “basic rules of pleading” in the court.

The hearing came on the same day Victorian Treasurer Tim Pallas – the sole shareholder of Breakthrough Victoria – announced plans to step down.

The fund just posted a $3m loss after three years of operation and CEO Grant Dooley recently announced he was stepping down.

Dr Dean Freestone, Co-Founder of Seer Medical.

Dr Freestone has alleged against Seer, the venture capital fund and Ms McCutchin that a condition of an extra $10m of funding – including a $2m draw-down of a loan – for his start-up was conditional on his exit from the board and senior management positions.

He was dismissed on March 27, according to his statement of claim, after he initially helped to secure $30m of funding by way of a convertible note in July 2022.

During an interlocutory hearing on Monday, barrister Leigh Howard, acting for Breakthrough Victoria and Ms McCutchin, claimed Dr Freestone’s complaints about the terms of funding agreements between investors and investees were not related to his ­employment.

“Ms McCutchin doesn’t know about any of this.

“This is a complaint between investor and company. That’s why we should get summary dismissal,” Mr Howard said.

Mr Howard said he accepted the terms of Breakthrough Victoria’s investment included the “stipulation” that Dr Freestone step down, and said the independent investors were represented by Simon Bartlet, who inserted the terms after Dr Freestone agreed to step down.

Dr Freestone has previously alleged in court documents that as funding negotiations broke down, Mr Bartlett of EWM Group became a key player as a representative of a group of shareholders.

“During the period from around January 29, 2024, to February 5, 2024, Bartlett and BV continued to negotiate final terms of the proposed funding,” Dr Freestone alleged in the ­documents.

Justice McElwaine said he could see how that argument was possible if the contract of employment made “no reference to the duty of the employee to go and find investors, but this contract does say that”.

“Why is it not open to Mr Freestone to complain to this employer that an external party was requiring the employer to terminate his employment?” Justice McElwaine said.

“(It is) a far more important point in my view (that) arose in argument,” he said.

Justice McElwaine pushed Mr Howard on the point, who ultimately agreed Dr Freestone would be responsible for selling the board a “pup”.

The court heard Dr Freestone’s barrister Charles Martin said he would have pleaded the case “differently” if he had his time again.

But he said what had been pleaded was that Breakthrough Victoria took action to “coerce the applicant not to exercise his workplace rights” and in relation to terms of funding, a term was included that was effectively going to require Dr Freestone to be dismissed.

Dr Freestone’s statement of claim will now have to be updated, where it previously alleged Breakthrough Victoria issued the terms sheet with stipulations “which made (the) draw down of the $2 million bridge loan conditional on the applicant being removed from all board, governance, senior management, and executive leadership positions with Seer constituted organising to take action against the applicant”.