Impiombato v BHP Group Limited (No 2)

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Federal Court of Australia

Impiombato v BHP Group Limited (No 2) [2020] FCA 1720

File number: VID 649 of 2018
Judgment of: MOSHINSKY J
Date of judgment: 27 November 2020
Catchwords:

REPRESENTATIVE PROCEEDINGS – shareholder class action – where claims brought on behalf of non-resident shareholders of both the respondent (an Australian company) and a United Kingdom company – whether provisions of Pt IVA of the Federal Court of Australia Act 1976 (Cth) capable of application to group members who are not residents of Australia

REPRESENTATIVE PROCEEDINGS – shareholder class action – where claims brought on behalf of non-resident shareholders of both the respondent (an Australian company) and a United Kingdom company – dual listed company structure – whether the Court should exercise its discretion to exclude non-resident group members from the proceeding – whether, in the alternative, the Court should exercise its discretion to exclude non-resident group members who do not register their participation in the proceeding

PRACTICE AND PROCEDURE – strike-out application – representative proceeding – shareholder class action – where claims brought on behalf of shareholders in both the respondent (an Australian company) and a United Kingdom company – dual listed company structure – where claims based on alleged contraventions of the continuous disclosure provisions of the Corporations Act 2001 (Cth) and the misleading or deceptive conduct provisions of the Corporations Act and the Australian Securities and Investments Commission Act 2001 (Cth) – whether the claims brought on behalf of the shareholders in the United Kingdom company were viable

Legislation:

Acts Interpretation Act 1901 (Cth), s 21

Australian Securities and Investments Commission Act 2001 (Cth), ss 12DA, 12GF

Corporations Act 2001 (Cth), ss 111AP, 672A, 672B, 674, 760A, 763A, 766A, 1041H, 1041I, 1317HA, 1325, 1337B

Federal Court of Australia Act 1976 (Cth), ss 3, 18, 23, 33C, 33E, 33G, 33X, 33Z, 33ZA, 33ZB, 33ZC, 33ZE, 33ZF

Judiciary Act 1903 (Cth), s 39B

Trade Practices Act 1974 (Cth), s 82

Civil Procedure Act 2005 (NSW), s 183

Supreme Court Act 1986 (Vic)

Federal Court Rules2011 (Cth), r 16.21

Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 23.02

Financial Services and Markets Act 2000 (UK), ss 90, 90A

Limitation Act 1980 (UK), ss 2, 14A, 14B

Prescription Act, 68 of 1969 (SA), ss 10, 11, 12, 13, 14

Protection of Businesses Act 99 of 1978 (SA), s 1F

Cases cited:

Akers v Deputy Commissioner of Taxation (2014) 223 FCR 8

Allstate Life Insurance Co v Australia & New Zealand Banking Group Limited (unreported, Federal Court of Australia, 13 September 1994)

Barcelo v Electrolytic Zinc Co of Australasia Limited (1932) 48 CLR 391

Blairgowrie Trading Limited v Allco Finance Group Limited (recs and mgrs apptd) (in liq) (2015) 325 ALR 539

BMW Australia Limited v Brewster (2019) 374 ALR 627

Bright v Femcare Limited [2002] FCA 11

Dyczynski v Gibson [2020] FCAFC 120

Evans v Davantage Group Pty Limited (No 2) [2020] FCA 473

Gorris v Scott (1874) LR 9 Ex 125

Grant-Taylor v Babcock & Brown Pty…

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Details
Case
[2020] FCA 1720
Decision Date

CaseChat Overview and Summary

Impiombato v BHP Group Limited (No 2) involved a shareholder class action brought on behalf of non-resident shareholders of both the respondent, an Australian company, and a United Kingdom company. The dispute centred around the applicability of provisions in Part IVA of the Federal Court of Australia Act 1976 (Cth) to group members who are not residents of Australia, as well as the court's discretion to exclude non-resident group members from the proceeding. The case also considered the viability of claims based on alleged contraventions of the continuous disclosure provisions of the Corporations Act 2001 (Cth) and the misleading or deceptive conduct provisions of the Corporations Act and the Australian Securities and Investments Commission Act 2001 (Cth).

The primary legal issues revolved around the applicability of Australian representative proceedings to non-resident shareholders in a dual listed company structure and the court's discretion to manage such proceedings. The court had to determine whether the provisions of Part IVA of the Federal Court of Australia Act 1976 (Cth) could be applied to non-resident group members and whether the court should exercise its discretion to exclude non-resident group members from the proceeding or require them to register their participation.

The court found that the provisions of Part IVA could indeed apply to non-resident group members. In terms of discretion, the court ruled that it would not exercise its discretion to exclude non-resident group members from the proceeding outright but left open the possibility of requiring them to register their participation. This decision was based on the court's consideration of the practicalities and fairness of including non-resident shareholders in the class action, as well as the implications for the management of the proceeding.

In conclusion, the court dismissed the interlocutory application and ordered each party to file a written submission on the costs of the interlocutory application within 14 days. The decision highlighted the complexities involved in managing shareholder class actions that involve non-resident shareholders and the need for careful consideration of jurisdictional and procedural issues.

Orders

Orders of the court

1. The applicants’ application, made by email dated 25 November 2020, for leave to refer the Court to a recent judgment of the High Court of Justice in England, be refused.

2. The respondent’s interlocutory application dated 12 May 2020 be dismissed.

3. Within 14 days, each party file a written submission (of no more than two pages) on the costs of the interlocutory application.

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

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Mr Betts stated that he was informed by Andrew Gunn, Practice Lead, Investor Relations at BHP, and believed that:(a)many of the largest legal registered shareholders of BHP Ltd and BHP Plc (by number of shares held) are nominees or custodians, who typically hold shares on behalf of others;(b)approximately 51 of the 65 shareholders in BHP Ltd and BHP Plc listed in paragraph 12 of his affidavit (i.e. the largest shareholders during the years comprising the Relevant Period) are nominees or custodians holding shares on behalf of others;(c)BHP has some information regarding:(i)beneficial owners of shares held by registered legal holders; and(ii)the investment managers or persons who make decisions to buy and sell those shares (decision makers),as a result of responses to tracing notices issued under ss 672A and 672B of the Corporations Act (and analogous mechanisms in foreign jurisdictions);(d)BHP has partial point-in-time information from August 2012, August 2013, August 2014 and August 2015 (in other words, around the time BHP published its annual reports for each of the 2012, 2013, 2014 and 2015 financial years), as to the geographical location of certain beneficial owners of (and decision makers in respect of) shares held by:(i)the top 200 registered shareholders of BHP Ltd;(ii)the top 200 registered shareholders of BHP Plc shares listed on the JSE; and(iii)the registered shareholders of BHP Plc shares listed on the LSE with more than 500,000 shares,(the Analysed Registered Shareholders);(e)the shares held by the Analysed Registered Shareholders represent 62-64% of the shares issued by BHP Ltd and 92-93% of the shares issued by BHP Plc;(f)the information BHP has about the decision makers and beneficial owners referrable to the Analysed Registered Shareholders extends to name, country, and in some instances city, but not address;(g)of the shares held by the Analysed Registered Shareholders, the geographical split of the decision makers in respect of those shares was as follows:(h)of the shares held by the Analysed Registered Shareholders in around August 2014 and August 2015 (in other words, around the time BHP published its annual reports for each of the 2014 and 2015 financial years), the geographical split of beneficial owners was as follows:(i)BHP Ltd does not hold comparable information to that set out at paragraphs (g) and (h) above in respect of shareholders other than the Analysed Registered Shareholders;(j)there may be additional persons with interests in BHP’s shares sitting behind the beneficial owners referred to in paragraph (h) above; in other words, the beneficial owners referred to in paragraph (h) above may be holding the shares on behalf of others; where that is the case, it is not possible for BHP to identify the ultimate beneficial owners of its shares;(k)given that information in respect of the Analysed Registered Shareholders above covers only part of BHP’s share registers, depending on the year:(i)between about 36% and 38% of BHP Ltd’s shares were not analysed;(ii)between about 7% and 8% of BHP Plc’s shares were not analysed; and(l)of the shares in BHP Ltd that were not analysed, a large number of these are likely to be Australian retail investors because of the small size of their holdings; for example, in BHP’s annual reports for each of the 2012, 2013, 2014 and 2015 financial years, more than 21% of shares were held by shareholders with 10,000 or fewer shares.The DLC Structure Sharing Agreement

Ratio Decidendi

Legal Principle Established

The expression “Equalisation Ratio” was defined in clause 1.1 as follows:Equalisation Ratio means the ratio for the time being of (a) the dividend, capital and (in relation to Joint Electorate Actions) voting rights per [BHP Ltd] Ordinary Share to (b) the dividend, capital and (in relation to Joint Electorate Actions) voting rights per [BHP Plc] Ordinary Share in the Combined Group (which shall initially be 1:1). The expression “Action” was defined as:Action means any distribution or any action affecting the amount or nature of issued share capital, including any dividend, distribution in specie, offer by way of rights, bonus issue, repayment of capital, sub-division or consolidation, buy-back or amendment of the rights of any shares or a series of one or more of such actions. The expression “Matching Action” was defined as:Matching Action means any Action in relation to either the holders of [BHP Ltd] Ordinary Shares or the holders of [BHP Plc] Ordinary Shares whose overall effect is such that, when taken together with an Action taken or to be taken in relation to the holders of [BHP Plc] Ordinary Shares or of [BHP Ltd] Ordinary Shares (as the case may be), is such as to ensure that the economic returns and voting rights of a [BHP Ltd] Ordinary Share and of a [BHP Plc] Ordinary Share are maintained in proportion to the Equalisation Ratio.Ownership of shares in BHP Brasil I note for completeness that, at the hearing, I sought clarification from the parties as to whether BHP Brasil was a wholly-owned subsidiary of both BHP Ltd and BHP Plc or of BHP Ltd alone. The statement of claim refers to BHP Brasil as a wholly-owned subsidiary of “BHP”, that is, the notional single unified economic entity (see the particulars to paragraph 21 and the definition of “BHP” in paragraph 10). This does not make the position clear. In oral submissions, senior counsel for the applicants stated that he was instructed that the relevant assets were jointly owned by BHP Plc and BHP Ltd. Senior counsel for BHP Ltd submitted that the interest in BHP Brasil was held by BHP Ltd alone, referring to paragraph 9 of an affidavit of Anna Sutherland, a partner of Herbert Smith Freehills, dated 20 September 2018 (filed in connection with an earlier interlocutory application). In that paragraph, Ms Sutherland stated: “At all material times, Samarco was a 50/50 contractual joint venture between a subsidiary of the Respondent, BHP Billiton Brasil Ltda (BHP Brasil), and a Brazilian company, Companhia Vale do Rio Dace S.A. (Vale).” It is not necessary for present purposes to resolve this factual point.Findings relating to foreign law In this section of these reasons, I set out my findings (of fact) in relation to foreign law, based on the expert evidence filed by the parties. These findings are made for the purposes of resolving BHP Ltd’s interlocutory application; if it is necessary to deal with the same or similar issues of foreign law on a subsequent occasion (eg, at trial), the material before the Court may be different and the findings may not be the same.