Impiombato v BHP Group Ltd

Case [2020] FCA 350

FEDERAL COURT OF AUSTRALIA

Impiombato v BHP Group Limited [2020] FCA 350

File number: VID 649 of 2018
Judge: MOSHINSKY J
Date of judgment: 17 March 2020
Catchwords: PRACTICE AND PROCEDURE – application for stay of civil proceeding pending the determination of criminal proceedings relating to the same subject-matter – where criminal proceedings had been commenced in Brazil against a wholly-owned subsidiary of the respondent and certain individuals relating to the failure of a tailings dam in Brazil – where the present proceeding was a shareholder class action based on alleged contraventions of the respondent’s continuous disclosure obligations and allegations of misleading or deceptive conduct – where it was alleged that: the respondent breached the ASX Listing Rules and the Corporations Act 2001 (Cth) by failing to disclose certain information and risks relating to the tailings dam; and the respondent breached the relevant legislation by making certain alleged misleading or deceptive representations – whether the interests of justice required the present proceeding to be stayed – whether certain interlocutory steps could proceed without causing prejudice to the respondent – application for stay dismissed
Legislation:

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

Corporations Act 2001 (Cth), ss 111AP, 674, 1041H, 1331

Evidence Act 1995 (Cth), s 128

Federal Court of Australia Act 1976 (Cth), s 23

Cases cited:

Australian Competition and Consumer Commission v The Construction, Forestry, Mining and Energy Union [2016] FCA 504

Australian Securities and Investments Commission v Australia and New Zealand Banking Group Ltd (2019) 138 ACSR 42

Beecee Group Ltd v Barton (1980) 5 ACLR 33

Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46

Construction, Forestry, Mining and Energy Union v Australian Competition and Consumer Commission (2016) 242 FCR 153

McLachlan v Browne (No 9) [2019] NSWSC 10

McMahon v Gould (1982) 7 ACLR 202

National Australia Bank Limited v Human Group Pty Ltd [2019] NSWSC 1404

Obeid v Commissioner of Taxation [2017] FCA 1135

Ransley v Commissioner of Taxation [2016] FCA 778

Re Plutus Payroll Australia Pty Ltd [2017] NSWSC 1854

R v Lawrence [1982] AC 510

Websyte Corporation Pty Ltd v Alexander (No 2) [2012] FCA 562

Date of hearing: 26 November 2019
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 153
Counsel for the Applicants: Mr PW Collinson QC with Mr AD Pound, Ms E Levine and Mr D Snyder
Solicitor for the Applicants: Phi Finney McDonald and Maurice Blackburn Lawyers
Counsel for the Respondent: Ms WA Harris QC with Mr KA Loxley
Solicitor for the Respondent: Herbert Smith Freehills

ORDERS

VID 649 of 2018
BETWEEN:

VINCE IMPIOMBATO

First Applicant

KLEMWEB NOMINEES PTY LTD (AS TRUSTEE FOR THE KLEMWEB SUPERANNUATION FUND)

Second Applicant
AND:

BHP GROUP LIMITED (ACN 004 028 077)

Respondent

JUDGE:

MOSHINSKY J

DATE OF ORDER:

17 MARCH 2020

THE COURT ORDERS THAT:

1.The respondent’s interlocutory application filed on 27 July 2018 be dismissed.

2.Subject to paragraph 3, the costs of the…

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Impiombato v BHP Group Ltd [2020] FCA 350
Case
[2020] FCA 350
Decision Date

CaseChat Overview and Summary

Impiombato v BHP Group Ltd concerned an application by BHP Group Ltd (BHP) for a stay of the proceedings in the Federal Court of Australia. The application was made in the context of a shareholder class action brought by the plaintiffs against BHP, alleging that BHP had breached its continuous disclosure obligations under the Corporations Act 2001 (Cth) and the Australian Securities Exchange (ASX) Listing Rules, as well as engaging in misleading or deceptive conduct. The plaintiffs alleged that BHP failed to disclose information and risks relating to the failure of a tailings dam in Brazil and made misleading representations. The central legal issues were whether the interests of justice required the proceedings to be stayed and if certain interlocutory steps could proceed without causing prejudice to BHP. The court had to consider the ongoing criminal proceedings in Brazil, the UK proceedings, and the potential for prejudice to BHP if the Australian proceedings continued.

The court considered various factors, including the nature of the proceedings, the risk of prejudice, and the likelihood of the Brazilian criminal proceedings being finalised before the Australian proceedings. The court found that at the current stage, the interests of justice did not require a stay of the Australian proceedings. The court acknowledged that there might be a future point where a stay would be appropriate but believed that further interlocutory steps could proceed without causing prejudice to BHP. The court also noted that the parties were free to raise the issue of costs at a later stage in the proceedings.

The court dismissed BHP's application for a stay of the proceedings. The court reserved the costs of the application and provided a brief period for the parties to indicate if they sought a different order regarding costs. If either party sought a different costs order, they were to give notice in writing to the court and the other party within seven days, after which directions would be made for the determination of the issue of costs on the papers.

Orders

Orders of the court

1. The respondent’s interlocutory application filed on 27 July 2018 be dismissed.

2. Subject to paragraph 3, the costs of the respondent’s interlocutory application be reserved.

3. If either party seeks a different costs order at this stage, that party give notice in writing to the Court and the other party within seven days. Directions will then be made for the determination of the issue of costs on the papers.

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

Background

Background to the litigation

There was no cross-examination.Background facts In addition to the facts set out above, the following background facts and matters are relevant to the stay application.BHP BHP is a global resources company with four business units: Petroleum and Potash; Copper; Coal; and Iron Ore. At the relevant times, BHP’s iron ore unit consisted of interests in mines in Western Australia and its indirect shareholding (through BHP Brasil) in Samarco.Samarco Samarco is a Brazilian company headquartered in Belo Horizonte, with substantial assets in Minas Gerais and Espírito Santo. At the relevant times, Samarco’s board of directors comprised four active and four alternate directors, with two of each appointed by each of Vale and BHP Brasil.The present proceeding Some of the procedural background to the present proceeding has been set out above. In the following paragraphs I will summarise the key allegations in the statement of claim. It is alleged, at [7] of the statement of claim, that at all material times, BHP Ltd was obliged by s 111AP(1) and/or s 674(2) of the Corporations Act and/or Rule 3.1 of the ASX Listing Rules, once it became aware of any information concerning BHP Ltd that a reasonable person would expect to have a material effect on the price or value of BHP ASX Shares, to tell the ASX that information immediately, unless any of the exceptions in Rule 3.1A of the ASX Listing Rules applied. It is also alleged that:(a)from the start of the relevant period until 30 April 2013, pursuant to Rule 19.12 of the ASX Listing Rules, BHP Ltd was taken to become aware of information if a director or executive officer of BHP Ltd had, or ought reasonably to have, come into the possession of the information in the course of the performance of their duties as a director or executive officer of BHP Ltd; and(b)from 1 May 2013 to the end of the relevant period, pursuant to Rule 19.12 of the ASX Listing Rules, BHP Ltd was taken to become aware of information if, and as soon as, an officer of BHP Ltd had, or ought reasonably to have, come into possession of the information in the course of the performance of their duties as an officer of BHP Ltd. At [11]-[16], it is alleged that each of the following individuals was an executive officer or an officer of BHP Ltd: Marcus Randolph, Ian Ashby, Jimmy Wilson, Jeffrey Zweig, Margaret Beck, and Sérgio Consoli Fernandes. It is alleged, at [18], that by reason of the preceding paragraphs, any information of which those persons became aware or which ought reasonably to have come into their possession, including in the course of carrying out their duties, was information of which BHP Ltd was aware within the meaning of Rules 3.1 and 19.12 of the ASX Listing Rules. It is alleged in [26] of the statement of claim that Samarco’s board of directors included the following individuals at various relevant times:(a)Mr Randolph, as a serving member of the board at all material times until about May 2013, including as Chairman between about 2009 and May 2013;(b)Mr Ashby, as a serving member of the board at all material times until about 2012;(c)Mr Wilson, as a serving member of the board at all material times from about 2012, including as Chairman of the board during 2014 and Vice (or Deputy) Chairman of the board during the latter half of 2013 and during 2015;(d)Mr Zweig, as an alternate member of the board from about 2011 or 2012 until 2013 and as a serving member of the board from about 2013 until about late 2014;(e)Ms Beck, as an alternate member of the board in or about 2014; and(f)Mr Fernandes, as an alternate member of the board from at least about 2012.It appears to be alleged that these individuals were representatives of BHP. It may be that they were representatives of BHP Brasil rather than BHP. For present purposes, nothing turns on whether they were representatives of BHP or BHP Brasil.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

It is implicit in what I have said above that there may come a point in time when it would be appropriate to stay the proceeding because any further interlocutory steps would cause prejudice to BHP Ltd or another person. However, this is something that should be assessed as the matter progresses. For the reasons given above, at this stage, the interests of justice do not require that all interlocutory steps be stayed.Conclusion It follows that the application for a stay is to be dismissed. In relation to costs, my preliminary view is that it is appropriate at this stage to reserve the costs of the application. This is not to say that the costs of this application should necessarily follow the outcome of the proceeding. It is, rather, to suggest that it may be more appropriate to deal with the costs of this application at a later point in time, once further interlocutory steps have taken place. It may be, for example, that the material and submissions filed in connection with this application can then be seen to have been relevant in the ongoing case management of this matter. However, I will provide a brief period of time for the parties to indicate if they seek a different order at this stage, in which case directions will be made for the filing of short written submissions and the matter can be dealt with on the papers.

Ratio Decidendi

Legal Principle Established

On 18 June 2019, the Court in the Bondholder Action issued a decision and order, granting the defendants’ motion to dismiss, and dismissing the plaintiffs’ operative complaint with prejudice. On 9 July 2019, the plaintiffs in the Bondholder Action filed a motion for reconsideration of the Court’s decision and order (the Motion for Reconsideration), which asked the Court to reconsider and vacate the order, and enter a new order denying the defendants’ motion to dismiss. The parties filed memoranda in relation to that motion. As at the date of Mr Cullen’s latest affidavit (4 October 2019), judgment on the Motion for Reconsideration was reserved and pending before the Court. BHP Ltd’s outline of submissions for the present application states at [88] that on 30 October 2019, the Court denied the Motion for Reconsideration and that any appeal needed to be filed within 30 days of that decision.The United Kingdom proceedings Three proceedings, involving a large number of claimants, have been commenced in the English High Court of Justice in relation to the failure of the Fundão Dam in November 2015. The claimants are individuals, businesses and other entities who allege that they have suffered personal injury, damage and/or other loss from the collapse of the dam. The claims are all brought under Brazilian law. Although the proceedings were commenced against multiple defendants, it seems that the claims are proceeding against only BHP Plc and BHP Ltd. The Named Individuals are not defendants to the UK proceedings. The claims were issued in the Liverpool District Registry of the English High Court of Justice. BHP Plc filed an application to transfer the claims in the original claim forms to the Technology and Construction Court in London. That application was heard on 17 April 2019, and the Court decided that the claims should continue in the Liverpool District Registry. On 7 and 18 May 2019, the claimants served the master particulars of claim on the defendants. The master particulars of claim set out four heads of claim – all under Brazilian law – against BHP Plc and BHP Ltd. One of these claims is alleged fault based liability under Article 186 of the Brazilian Civil Code. It is alleged, in essence, that the defendants did not take action to address certain issues of which they were allegedly aware. In terms of awareness, the claimants rely upon the attendance of various people – including Mr Randolph, Mr Wilson, Mr Zweig, Ms Beck and Mr Fernandes – at Samarco board or committee meetings. Mr Michael stated in his 30 May 2019 affidavit that, in light of the master particulars of claim, BHP Plc and BHP Ltd would need to consider whether and when it would be appropriate to seek a stay of the UK proceedings pending the resolution of the Brazilian criminal proceedings. He stated that this consideration would be in the context of BHP Plc and BHP Ltd considering other preliminary applications which – depending on their outcome – may make it unnecessary to seek such a stay.