Melbourne City Investments Pty Ltd v WorleyParsons Limited (No 2)
[2014] VSC 523
•17 October 2014
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE | Not Restricted |
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2013 6536
| MELBOURNE CITY INVESTMENTS PTY LTD (ACN 161 046 304) | Plaintiff |
| v | |
| WORLEYPARSONS LIMITED (ACN 096 090 158) | Defendant |
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JUDGE: | Ferguson JA |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 8 September 2014 |
DATE OF RULING: | 17 October 2014 |
CASE MAY BE CITED AS: | Melbourne City Investments Pty Ltd v WorleyParsons Limited (No 2) |
MEDIUM NEUTRAL CITATION: | [2014] VSC 523 |
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PRACTICE AND PROCEDURE – GROUP PROCEEDING — Application to file proposed amended statement of claim — Alleged breach of continuous disclosure obligations under ASX Listing Rule 3.1 — Direction sought for compliance with Listing Rule — Declaration of contravention sought — Plaintiff purchased shares before alleged contravening conduct occurred — Leave should not be refused if only basis for refusal relied on proper construction of legislation — No reasonable prospect of success of obtaining relief sought — Leave refused — Corporations Act 2001 (Cth), s 793C considered.
PRACTICE AND PROCEDURE – GROUP PROCEEDING — Whether proceeding should be dismissed where four attempts at pleading made — No reasonable prospect of success — Plaintiff had no real interest to prosecute — Interest of group members not prejudiced by dismissal as separate group proceeding commenced — Dismissal in accordance with implementation of overarching purpose of Civil Procedure Act 2010 (Vic) ss 7(1), 8(1) and 9.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N J O’Bryan SC with Mr M W L Symons | Tan Partners |
| For the Defendant | Ms W A Harris, one of Her Majesty’s Counsel with Mr R G Craig and Ms J Findlay | Herbert Smith Freehills |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
The proposed second further amended statement of claim....................................................... 1
Does the proposed pleading have no reasonable prospects of success?................................. 4
Reasonable prospects for the direction..................................................................................... 5
Reasonable prospects for the declaration............................................................................... 16
Other complaints about the pleading........................................................................................... 18
Should the proceeding be dismissed?......................................................................................... 18
Conclusion......................................................................................................................................... 19
HER HONOUR:
Introduction
This proceeding is what is colloquially referred to as a securities class action.[1] It is brought against WorleyParsons Limited by a shareholder, Melbourne City Investments Pty Ltd (‘MCI’), and broadly concerns alleged inadequate disclosure of information by WorleyParsons to the market.
[1]Supreme Court Act 1986 (Vic) pt 4A.
MCI seeks leave to file a further amended statement of claim. This is the fourth version of the pleading that MCI has sought to rely upon. WorleyParsons opposes the application for leave and seeks an order dismissing the proceeding.
Despite multiple attempts over many months, MCI has been unable to articulate a cause of action which has reasonable prospects of success. Its prospects of doing so are negligible. For the reasons set out below, the proceeding will be dismissed.
The proposed second further amended statement of claim
In brief terms, MCI’s proposed pleading alleges that:
(a)MCI purchased 28 shares in WorleyParsons in November 2012 and still holds those shares;
(b)WorleyParsons had internal reporting systems that ensured adequate and timely reporting of all material or significant developments that a reasonable person would expect to have a material effect on the price or value of its shares;
(c)on 17 May 2013, WorleyParsons revised its earnings guidance downwards and informed the market that its earnings in the second half of the 2013 financial year had been reduced but that it had confidence in the growth of the business after that;
(d)on 14 August, 9, 10 and 15 October 2013, WorleyParsons published forecasts of increased earnings in the 2014 financial year;
(e)before 20 November 2013, WorleyParsons did not disclose any expectation of future restructuring costs;
(f)on 20 November 2013, WorleyParsons corrected its 2014 earnings forecast, business performance and restructuring costs in an announcement to the ASX and advised the market that in the 2014 financial year its business would generate materially lower earnings and would incur material restructuring costs (‘the earnings forecast matters’);
(g)information concerning the earnings forecast matters was not made generally available to the market before 20 November 2013;
(h)a reasonable person would have expected each of the earnings forecast matters to have a material effect on the price or value of WorleyParsons’ shares if information concerning those matters was made generally available;
(i)on or before 1 August 2013, WorleyParsons was aware of the earnings forecast matters but did not immediately tell the ASX information about those matters;
(j)this constituted a breach of ASX Listing Rule 3.1 and the continuous disclosure obligations under s 674(2) of the Corporations Act 2001 (Cth);
(k)on 14 August, 9, 10 and 15 October 2013, without reasonable grounds for doing so, WorleyParsons made representations with respect to a future matter (its expected earnings in the 2014 financial year) with the consequence that each representation is taken to be misleading pursuant to s 769C(1) of the Corporations Act;
(l)the conduct of WorleyParsons was misleading or deceptive in breach of s 1041H of the Corporations Act;
(m)the statements made by WorleyParsons on 14 August, 9, 10 and 15 October 2013 were false in a material particular or were materially misleading and were likely to have the effect of increasing, maintaining or stabilising the price for trading in WorleyParsons’ shares on the ASX;
(n)WorleyParsons knew or ought reasonably to have known that the statements were false in a material particular or were materially misleading;
(o)the publication by WorleyParsons of increased earnings for the 2014 financial year constituted the making of a statement that was false or misleading in breach of s 1041E of the Corporations Act;
(p)MCI is a person aggrieved (within the meaning of s 793C of the Corporations Act) by the failure of WorleyParsons to meet its obligation to comply with the ASX Listing Rule 3.1.
MCI seeks a declaration that WorleyParsons has contravened ASX Listing Rule 3.1 and a direction pursuant to s 793C(2) of the Corporations Act that WorleyParsons, and its directors, comply with ASX Listing Rule 3.1. That Rule provides:
Once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities, the entity must immediately tell ASX that information.
So far as relevant, s 793C provides as follows:
(1)If a person who is under an obligation to comply with or enforce any of a licensed market’s operating rules fails to meet that obligation, an application to the Court may be made by:
(a)ASIC; or
(b)the licensee; or
(c)the operator of a clearing and settlement facility with which the licensee has clearing and settlement arrangements; or
(d)a person aggrieved by the failure.
(2)After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to:
(a)the person against whom the order is sought; or
(b)if that person is a body corporate - the directors of the body corporate;
about compliance with, or enforcement of, the operating rules….
(5)For the purposes of this section, if a body corporate fails to comply with or enforce provisions of the operating rules of a licensed market, a person who holds financial products of the body corporate that are able to be traded on the market is taken to be a person aggrieved by the failure.
By virtue of this last subsection, as a shareholder, MCI has standing under s 793C if WorleyParsons has failed to comply with Listing Rule 3.1.
Does the proposed pleading have no reasonable prospects of success?
WorleyParsons contends that the proposed pleading has no reasonable prospects of success,[2] because even if the facts alleged are made out, the only relief sought by MCI would not be granted by the court. In those circumstances, WorleyParsons argued that the pleading is futile, as the proposed claim would immediately be susceptible to a successful strike‑out application. Indeed, WorleyParsons contended that the proposed claim is hopeless and bound to fail because:
(a)the discretion of the court to make a direction under s 793C of the Corporations Act is not engaged in circumstances where, on MCI’s own case, a ‘corrective disclosure’ has been made;
(b)alternatively, the lack of any need for and the potential consequences of a direction ‘that [WorleyParsons], and its directors, comply with ASX Listing Rule 3.1’ means that the court would not exercise its discretion to make the direction sought;
(c)MCI has no reasonable prospects of obtaining the declaration that it seeks.
[2]Civil Procedure Act 2010 (Vic) s 63; Lysaght Building Solutions Pty Ltd (t/a Highline Commercial Construction) v Blanalko Pty Ltd [2013] VSCA 158 [35].
Reasonable prospects for the direction
As noted previously, MCI seeks a direction pursuant to s 793C that WorleyParsons and its directors comply with Listing Rule 3.1.
Listing Rules of stock exchanges have had the force of statutory enforcement since the mid‑1970s.[3] The legislation permitted an aggrieved person to seek relief. The early iterations of the statutory provisions did not specify who qualified as an ‘aggrieved person’. Olney J considered the point in 1986 in Robox Nominees Pty Ltd v Bell Resources Ltd.[4] The operative provision was s 42 of the Securities Industry (Western Australia) Code. Robox (as trustee for a BHP subsidiary) held some shares in Bell Resources and sought relief under s 42 in respect of an alleged failure by Bell Resources to comply with the Listing Rules. Olney J held that Robox was not a person aggrieved for the purposes of s 42. His Honour took the view that because the legislature had used the term ‘a person aggrieved’ and not the words ‘a shareholder’ something over and above the mere holding of shares was required to establish standing.[5]
[3]Starting with the Securities Industry Act 1975 (Vic), s 31 (this version of the legislation has now been repealed) and like legislation in New South Wales, Queensland and Western Australia.
[4](1986) 13 ACLR 475.
[5]Ibid 476.
The concept of a shareholder being an aggrieved person by virtue of their shareholding alone was introduced in the mid‑1990s. The Explanatory Memorandum to the Corporate Law Reform Bill 1993 (Cth) stated:
In Robox Nominees Pty Ltd v Bell Resources (1986) 13 ACLR 475 it was held that persons aggrieved by the failure of the ASX to enforce its Rules could not apply to the Court for an order unless they had suffered real commercial prejudice. To overcome this decision, proposed subsection 777(4) will provide that, if a body corporate fails to comply with or enforce provisions of the business rules or listing rules of a securities exchange, a person who holds securities of the body corporate that are quoted on a stock market of the exchange is taken to be a person aggrieved by the failure. Proposed subsection 777(5) provides that proposed subsection (4) does not limit the circumstances in which a person may be aggrieved by a failure for the purposes of subsection (1).
So, MCI submitted, the introduction of what is now s 793C(5), was specifically intended to give standing and allow orders to be made where the applicant shareholder has suffered no real commercial prejudice.
MCI stressed, and in my view it is beyond doubt, that there is a public interest in the observance of the Listing Rules of a stock exchange. MCI contended that two decisions are of assistance in understanding the breadth of the power that the court has to protect that public interest. First it referred to the New South Wales Supreme Court, Court of Appeal decision in FAI Insurance Ltd v Pioneer Concrete Services Ltd (No. 2),[6] which concerned s 42 of the Securities Industry (NSW) Code. As will be remembered, there was no equivalent provision in s 42 to the current s 793C(5). So far as relevant, s 14 of the Securities Industry Code empowered the court to make such orders as it thought fit on the application of the securities exchange where there was a breach of the Listing Rules. Street CJ held that the two sections may overlap in some circumstances and that the fact that a breach could not be cured did not necessarily mean that the court could not make orders under s 42.[7] Similarly, Kirby P held that s 42 should not be narrowly construed. In his Honour’s view, the power given to the court was not limited to directing compliance with the Listing Rules.[8] With reference to s 42, he stated:
it permits the protective intervention of the court to ensure that breaches of listing requirements, which, for whatever reason, are not pursued by the Commission or a securities exchange, can be brought to the notice of the court by a person aggrieved. That facility provides an appropriate protection, including to the public interest which may be or become involved in suggested breaches of the listing requirements of a securities exchange.[9]
[6](1986) 10 ACLR 801.
[7]Ibid 805.
[8]Ibid 811.
[9]Ibid 812.
On this issue, Samuels JA dissented.[10]
[10]Ibid 814–815.
Next, MCI referred to the Full Court decision in Repco Ltd v Bartdon Pty Ltd, Canadian Tire Corporation & McEwans Ltd.[11] The case arose against the background of a potential takeover by Repco of McEwans. In effect, two unlisted companies acquired shares in McEwans in an attempt to thwart the takeover. Repco contended that there was a breach of the Listing Rules. A judge refused Repco’s discovery application. On an application for leave to appeal, the Full Court held that the two unlisted companies were not under an obligation to observe the Listing Rules. Consequently, as Repco’s substantive claim could not succeed, the Full Court observed that discovery should not be ordered and leave to appeal was refused. In reaching the conclusion that there was no obligation to observe the Listing Rules, the court made some observations about the effect of s 31 of the Securities Industry Act 1975 (Vic), which was a predecessor to s 793C. Again, there was no equivalent to s 793C(5) making a shareholder a person aggrieved without more. The Full Court said:
The section… enables orders to be made against persons who are by contract obliged to observe, enforce or give effect to the business rules or listing rules of a stock exchange. But the section does not merely give statutory effect to remedies which would otherwise be available to a contracting party against another contracting party who has acted in breach of contract. The Legislature has recognized that the public interest may require that the listing rules or the business rules of a stock exchange are observed even though no contracting party decides to seek an order. It is for this reason, no doubt, that the Commissioner for Corporate Affairs is given locus standi under the section to seek orders directed to a person who is bound to observe the listing rules, to enforce them or give effect to them. Without a provision such as that contained in s 31 the Commissioner would not be able to obtain such an order. The section may also have the effect of expanding somewhat the types of orders that might be made against a person bound to observe the listing rules but it is unnecessary to reach a final conclusion upon this point. Whilst a contracting party might in the absence of s 31 be able to obtain an order for specific performance of one of the listing rules, the Commissioner would not be able to do so and specification of the orders which the Court is empowered to make on application by him was therefore necessary. In any event it might well have been thought that even where the applicant for relief was a contracting party it was desirable to specify in clear terms the orders which the Court might make. The very nature of the listing rules may have been thought to make the ordinary power of the Court to order specific performance of a contract inadequate. The power to make an order under s 31 is expressed in terms which import a discretion, although the expression “the Court may” is also apt simply to express an authority or power.[12]
[11][1981] VR 1.
[12]Ibid 9–10.
Dependent upon the meaning of the words ‘a person aggrieved’, the Full Court indicated that the section may enable a person other than the regulator to obtain relief but observed that it was not necessary to decide the point in the case before it.[13]
[13]Ibid 10.
WorleyParsons submitted that there is nothing in either case that assists MCI, as neither establishes a precedent for the kind of forward looking relief that MCI seeks in this proceeding.
WorleyParsons accepts that by virtue of s 793C(5), MCI is a person aggrieved and has standing. Nevertheless it submitted that there are two fundamental problems for MCI. First, it says that on a proper construction of s 793C(2), the provision enables the court to give directions which would have the effect of enforcing or rectifying non‑compliance with Listing Rules where the defendant remains in breach of them. That is, it is a curative power rather than a forward looking power to restrain hypothetical and unthreatened future breaches of the Listing Rules. WorleyParsons says that its construction case does not rest on reading in limitations and it urged the court to give the words their ordinary meaning and not to make the section do more work than it is capable of in order to permit MCI to obtain the relief that is sought.
If a forward looking direction were given then, if the company failed to comply, it may be exposed to sanctions for contempt. The effect would be to convert a civil liability into a quasi‑criminal one.[14] So, WorleyParsons contends, that is a powerful consideration militating against any construction of s 793C(2) to make the directions sought by MCI.
[14]Australian Securities and Investments Commission v Maxwell (2006) 59 ACSR 373, 408–9 [140]–[142]; Australian Stock Exchange Limited v McLachlan (2002) 43 ACSR 362, 384 [93].
WorleyParsons accepted that there are no authorities that have decided the question of whether, on its proper construction, s 793C(2) is limited to the making of curative orders or whether it could be invoked to make a forward looking direction such as is sought by MCI. However, it contended that the clear construction of the section is that it is limited to the former. First, it pointed to the words of the section which speak of a failure to comply, not a threatened failure to comply. WorleyParsons contrasted s 793C with s 1324 of the Corporations Act and s 80 of the Competition and Consumer Act 2010 (Cth). The latter sections empower the court to grant injunctive relief even where there is no threat of wrongful conduct.[15] Section 793C does not contain such a provision. WorleyParsons contended that the fact that s 793C is silent about this supports its view that the section is concerned with either enforcement (regarding an extant breach) or compliance.
[15]Corporations Act 2001 (Cth) s 1324(5), (6); Competition and Consumer Act 2010 (Cth) s 80(4), (5).
In relation to enforcement, WorleyParsons cited Australian Stock Exchange Limited v McLachlan.[16]In that case, Mr McLachlan had not paid a fine imposed on him by the ASX. The ASX brought proceedings seeking (among other things) a declaration that Mr McLachlan had contravened the rules in failing to pay the fine and an order that he pay the fine. The New South Wales Court of Appeal refused to make the declaration, determining that the court’s reasons served the same purpose.[17] In relation to an order for payment of the fine, Heydon JA said:
Section 793C(2) gives the court power to “make an order giving directions to” Malcolm McLachlan “about compliance with, or enforcement of, the operating rules”.
The order sought in para 4 is a decree of specific performance, and breach of such a decree carries the sanction of imprisonment for contempt of court. The same is true of a breach of orders made under ss 793C and 1101B.
The ASX is making a money claim. Save in exceptional circumstances, it is better that failure to comply with orders to pay money should be enforced by execution rather than committal for contempt. For that reason the orders sought should not be made.[18]
[16](2002) 43 ACSR 362.
[17]Ibid 383 [86] (per Heydon JA, Mason P and Hodgson JA agreeing).
[18]Ibid 384 [92]–[94].
WorleyParsons contended that other authorities also confirmed that the section does not have a forward looking focus as they had been unable to identify any case where forward looking orders had been made.
In any event, WorleyParsons submitted that there is a question about whether the word ‘enforce’ in s 793C(1), is only directed to the regulatory body charged with enforcing the Listing Rules. So, WorleyParsons says, if a third party is aggrieved by the ASX’s failure to enforce the Listing Rules, then s 793C gives the court the power to make enforcement directions.
By contrast, WorleyParsons submitted that the compliance aspect of the section operates when the court is directing the person who has failed to meet the requirements of the rules to comply. Implicit in this, says WorleyParsons, is that the company is failing to comply. That is, the section can only be invoked where it is failing to meet an obligation and compliance is naturally a backward looking matter. This is consistent, so WorleyParsons argued, with the court’s reluctance to direct a person to comply with the law unless there is a proper basis for fearing that a person will not comply because of a threat not to do so.
WorleyParsons further observed that on MCI’s own proposed pleaded case, any non‑compliance with Listing Rule 3.1 was corrected as at 20 November 2013 and there is no forward looking order that the court is able to make ‘about compliance with, or enforcement of the [Listing Rules]’. Consequently it says that the discretion of the court to give directions pursuant to s 793C(2) is not engaged.
In my view, the proper construction of s 793C(2) and in particular whether, insofar as a company (as opposed to a licensee) is concerned, the section may only be relied upon to address existing non‑compliance with the Listing Rules, is a matter that should not be determined at an early stage of the proceeding.[19] The proper construction of the section is not so clear‑cut as to warrant (on that basis alone) denying the plaintiff, at a pleading level and before there is a defence, the opportunity to prosecute his claim. So far as I have been able to ascertain, there is no authority on point. The fact that WorleyParsons has not been able to identify a case where the section has been relied upon to grant forward looking relief does not necessarily lead to the conclusion that it could not found such relief. It may simply be that MCI is the first plaintiff to frame a claim in this way. It should not be overlooked that WorleyParsons would not lose the right to argue the point fully at some later stage of the proceeding, if the proceeding were not for other reasons to be dismissed. Consequently, I would not dismiss the proceeding on the basis that on the proper construction of s 793C(2), MCI has no reasonable prospects of success.
[19]See the recent observations of Nettle JA in RSD Chartered Accountants v Bolitho [2014] VSCA 186 [17]–[18] (Ashley JA agreeing [20]).
In any event, WorleyParsons says that even if the subsection is engaged, it gives the court a discretion as to whether, and in what form, it will make orders to address a contravention of the Listing Rules and that here, there is no reasonable prospect of the court making the direction sought by MCI.
MCI says that the court is capable of granting the relief that it seeks and it has standing as a person aggrieved to seek it. In this context, it submitted that although there may be no financial consequence for it, such a situation was contemplated by the legislature in enacting s 793C(5). Consequently, it submitted that it is capable of seeking both the declaration and the direction.
MCI contended that the fact that the alleged breach by WorleyParsons is irremediable does not disentitle shareholders from seeking orders pursuant to s 793C. MCI submitted that shareholders are entitled to the declaration that it seeks, a properly corrective disclosure which states when WorleyParsons was aware of the earnings forecast matters and the information that WorleyParsons was then aware of and an order concerning future compliance with Listing Rule 3.1. MCI argues that given the important public interest alone, the declaration and a properly corrective disclosure are important in deterring other listed companies from failing to comply with the continuous disclosure requirements.
MCI acknowledged that there is no pleading in the current version of the statement of claim that there is any threat by WorleyParsons to breach the Listing Rules, but it submitted that there are enough facts pleaded as to what is alleged to have occurred in the last 12 months to justify the submission that there is a clear possibility, if not a likelihood, of future repetition of breach.
MCI drew on observations made by Gummow J in Truth About Motorways Pty Limited v Macquarie Infrastructure Investment Management Limited,[20] where his Honour said that the legislature may adapt existing remedies, modify them or create new remedies for a number of reasons — to prevent or compensate for injury or to enforce or induce compliance with the law.[21] His Honour opined:
Part VI (which contains s 80) and Pt XII (which contains s 163A) make provisions which effect the attainment of one or more of those ends. In many cases, the remedy sought under s 80 for a prohibitory injunction would have the character of enforcing present compliance or inducing future compliance with the norm of conduct imposed by s 52, and a declaration would provide consequential relief. In the present case, the mandatory injunction sought would be apt to counterbalance the injury to the public interest allegedly sustained by the publication of the Statement [which is alleged to be misleading or deceptive].[22]
[20](2000) 200 CLR 591.
[21]Ibid 622 [79].
[22]Ibid 623 [80].
So, MCI argued, here there is no basis to argue that there is no reasonable prospect of it obtaining the relief that it seeks. MCI concluded that the exercise of discretion by the court is a matter for trial and there is no summary basis upon which the relief sought should be disallowed. In this regard it observed that at this stage the court does not have the benefit of evidence at a trial and, assuming that what is alleged is established at trial, WorleyParsons will be shown to have misled the market in a serious way on four separate occasions. So, MCI submitted, there might be a range of possible responses that a trial judge would have, dependent upon what evidence there is about how that occurred. If it were established at trial that WorleyParsons deliberately misled the market, then MCI says that this would be a matter of vital public importance and it is highly improbable that the court would not grant relief in those circumstances. MCI accepted that the relief would need to be granted in terms that precisely articulated the nature of the wrongdoing and forbid repetition of that wrongdoing. In MCI’s opinion, the proper time for formulation of the appropriate relief is not now but rather after a trial when a declaration and direction could be specifically focussed on what the evidence disclosed had occurred and the reasons for the breach, particularly whether it was deliberate or inadvertent.
The parties referred me to a number of decisions about the exercise of the discretion in s 793C(2) and its predecessor sections. I will refer to just two, as it seems to me that the question of the exercise of the discretion must depend upon the relevant facts as pleaded and proven, and examination of other cases is only of slight assistance. In Oil Basins Ltd v Bass Strait Oil Company,[23] one of the issues was as to the proper interpretation of the Listing Rules. Relying in part on s 793C, Oil Basins sought declaratory and other relief. It contended that the court should grant it relief because its shareholding had been wrongfully diluted and because the relief would act as specific and general deterrence. Gordon J held that on a proper interpretation, Bass Strait Oil Company had breached the Listing Rules. Her Honour observed that although the proceeding was not commenced by the regulator, it was appropriate to grant a declaration of contravention. There was a dispute between the parties about the operation of the Listing Rules and the declaration was necessary to determine the parties’ respective positions. In addition, her Honour was of the view that it was in the public interest to make the declaration because of the identity of the parties and the nature of the issue.[24] Her Honour declined to grant any further relief noting that the overall result of the contravening conduct was an illegitimate dilution of Oil Basins’ shareholding by less than half of 1 per cent.[25] In addition, Gordon J formed the view that any potential prejudice to Oil Basins had been addressed adequately by an undertaking that had been given by Bass Strait Oil Company to the stock exchange.[26] In this regard, her Honour observed that the undertaking pragmatically, effectively and equitably addressed the question of the dilution of Oil Basins’ shareholding with the declaration addressing ‘the need for the contravention to be recorded and, to the extent relevant, the question of deterrence’.[27]
[23](2012) 91 ACSR 700.
[24]Ibid 725 [122].
[25]Ibid 725 [123].
[26]Ibid 725 [124].
[27]Ibid 726 [125].
In Peninsula Gold Pty Ltd v Sunbeam Victa Holdings Ltd,[28] the Listing Rules required Sunbeam to register certain share transfers by 8 May 1996. It failed to do so. The transferors sought a declaration that Sunbeam was obliged to register the transfers by 8 May 1996. They commenced proceedings on 23 May 1996. Sunbeam registered the transfers on 24 May 1996. The matter proceeded to trial when the issue was whether the plaintiffs were entitled to a declaration that Sunbeam was obliged to register the transfers not later than 8 May 1996 and to an order rectifying the register. In circumstances where the transfers had been registered by the time of the hearing and the plaintiffs had not shown that there was any practical disadvantage to them from the delay in registration or that the relief sought would improve their position, Bryson J refused to grant the relief sought.[29]
[28](1996) 20 ACSR 553.
[29]Ibid 559.
I proceed on the assumption that the case as pleaded by MCI would be made out, including an assumption that the proper construction of s 793C enables the court to make a forward looking direction. In my view, if that pleaded case is made out, there is no reasonable prospect of the court making the direction that MCI seeks. To recap, the direction sought is one that WorleyParsons and its directors comply with Listing Rule 3.1.
Whilst s 793C(5) gives MCI standing, that is something different from guaranteeing that the relief sought will be granted.[30] They are two separate considerations. Consequently, I do not accept MCI’s submissions that the inclusion of s 793C(5) means that because it is a shareholder it will be granted relief.
[30]Truth About Motorways Pty Limited v Macquarie Infrastructure Investment Management Limited (2000) 200 CLR 591, 601 [14] (Gleeson CJ and McHugh J), 613 [52] (Gaudron J), 660 [180] (Kirby J), 671 [217] (Callinan J).
The court should be slow to shut out a claim at an early stage on the basis that in the exercise of a discretion, the relief sought would not be granted.[31] Nevertheless, taking into account the history of the proceeding and that there have been four versions of proposed statement of claim, this is a case which warrants such a course. Here, there is no pleaded allegation that WorleyParsons threatens to continue to breach Listing Rule 3.1 in the future. Nor is it pleaded that based on its past conduct, it is reasonable to apprehend that WorleyParsons would fail to comply with the Listing Rule. Nor is it pleaded that WorleyParsons deliberately contravened Listing Rule 3.1. It is not sufficient to say that the facts pleaded might support such an allegation — there is simply no allegation to that effect pleaded. I do not think that the observations of Gummow J in Truth About Motorways assist MCI. In effect, the applicant in that case sought a mandatory injunction pursuant to s 80 of the Trade Practices Act 1974 (Cth) that the respondent publish a corrective advertising statement and a declaration that the respondent had engaged in misleading or deceptive conduct. That relief is directed towards addressing past contravening conduct. Against that background, and bearing in mind that the case is essentially about standing, I do not understand his Honour’s reference to ‘inducing future compliance’ to extend the availability of relief to circumstances where there is no threat of non‑compliance going forward.
[31]Murphy v State of Victoria [2014] VSCA 236 [10]–[11].
Moreover, there is no reasonable prospect that the court would direct a company to comply in the future with a Listing Rule in such broad terms as are sought. The effect would be to turn a breach of the obligation imposed by Listing Rule 3.1 into one that was punishable as a contempt. In some cases, the terms of discretionary relief may be crafted more precisely after a trial when all of the facts are known. Importantly, here though, the form of relief sought could not be made more specific. It is directed to general future compliance in respect of disclosure to the market as required by Listing Rule 3.1, but it is based upon specific past conduct of alleged non‑disclosure of particular matters (that is, about forecasts concerning the 2014 financial year) that can have little or no impact on the share price going forward, the matters having now been disclosed. So, even if it were established at trial that WorleyParsons had failed to comply with Listing Rule 3.1 so far as the earnings forecast matters were concerned, the court would not be in a position to fashion a direction for future compliance tied to the failure in 2013 in respect of those confined matters.
I should add that MCI’s submissions that shareholders are entitled to a direction that WorleyParsons publish a properly corrective disclosure has no pleaded foundation. What is pleaded is that WorleyParsons corrected its disclosures on 20 November 2013. Put another way, what MCI alleges is not a failure by WorleyParsons to make a corrective disclosure but rather that the earnings forecast matters were not disclosed at the time that they should have been. Consequently, relief in the form of a direction for a corrective disclosure would not be granted.
Reasonable prospects for the declaration
As noted above, MCI seeks a declaration that WorleyParsons has contravened ASX Listing Rule 3.1. WorleyParsons accepted that although s 793C does not give the court power to grant declaratory relief, MCI’s application for such relief is in effect ancillary to the relief that could be granted by way of direction under s 793C.
As I have touched upon, standing and relief are separate matters. This was made clear in Truth About Motorways Pty Limited v Macquarie Infrastructure Investment Management Limited.[32]Among other things, s 80 of the Trade Practices Act enabled any person to apply for an injunction against a person who had engaged in misleading or deceptive conduct in contravention of s 52. Similarly, s 163A provided that any person may seek a declaration in relation to the operation of a number of provisions, including s 52. The High Court held that ss 80 and 163A were valid laws. Gaudron J observed that nevertheless the relief sought must be appropriate to the wrong about which complaint is made. In that context, her Honour observed that a declaration cannot be made if it will produce no foreseeable consequences for the parties.[33] In this regard, in Ainsworth v Criminal Justice Commission,[34] the High Court stated that the power to grant declaratory relief:
is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have ‘a real interest’ and relief will not be granted if the question ‘is purely hypothetical’, if relief is ‘claimed in relation to circumstances that [have] not occurred and might never happen ’or if ‘the Court’s declaration will produce no foreseeable consequences for the parties’.[35]
[32](2000) 200 CLR 591.
[33]Ibid 613 [52]. See also the observations of Gleeson CJ and McHugh J 601 [14], Kirby J 660 [180] and Callinan J 671 [217].
[34](1992) 175 CLR 564.
[35]Ibid 582.
Essentially, MCI made the same submissions in respect of declaratory relief that it had made in respect of the relief it seeks under s 793C(2).
In my opinion, MCI has no reasonable prospect of obtaining the declaratory relief that it seeks. That relief would be ancillary to the relief that it seeks under s 793C(2) and in respect of which it is afforded standing by reason of s 793C(5). For the reasons that I have given, the claim for relief under s 793C(2) will not be permitted to go forward. Consequently, the s 793C foundation for standing to seek declaratory relief falls away. Without that foundation, MCI does not have standing.[36]
[36]Melbourne City Investments Pty Ltd v WorleyParsons Limited [2014] VSC 303.
In any event, if I am wrong, the prospect of MCI obtaining the declaratory relief that it seeks is so remote that it should not be permitted to prosecute the proposed claim. On the basis of its proposed pleading, it is not affected by any alleged failure to disclose or, for that matter, any misleading conduct which occurred after it purchased shares in WorleyParsons. In that context, the proposed declaration will not produce any foreseeable consequences for MCI and WorleyParsons. As I have noted above, MCI has pleaded that WorleyParsons has published a corrective disclosure. As such, there can be no advantage to MCI in obtaining a declaration of contravention.
So far as a declaration might act to inhibit WorleyParsons from prospective contravening conduct, as I have said above, there is no allegation that WorleyParsons threatens to breach the Listing Rules in the future. Moreover, there is no reasonable prospect of the court granting declaratory relief to MCI for the sole purpose of satisfying the public interest or as deterrence to other publicly listed companies. I accept that those matters may possibly be relevant where there are other good reasons for a shareholder to obtain declaratory relief. However, when they are the only reasons for seeking relief, in my opinion it is for the regulator to seek a declaration.
It follows that in my view the application for leave to file and serve the proposed pleading should be refused.
Other complaints about the pleading
WorleyParsons made other complaints about the proposed pleading and claimed that it is vague, embarrassing and an abuse of process. It also argued that the proceeding is an inapposite vehicle for the prosecution of the group members’ claims. Given the conclusion that I have reached in respect of WorleyParsons’ primary contentions, it is unnecessary for me to decide these other issues. As will be seen from what I say later in these reasons, there is a separate group proceeding brought by another WorleyParsons shareholder. The pleading in that proceeding is in substantially the same form as that proposed by MCI in this proceeding. Taking that into account, I do not propose to express a view about the additional criticisms of the pleading that WorleyParsons has made.
Should the proceeding be dismissed?
WorleyParsons submitted that the appropriate course is to dismiss the proceeding as there is no valid pleading on foot despite MCI’s numerous attempts to bring forward a viable statement of claim. WorleyParsons contended that MCI is bereft of an interest which it could validly seek to vindicate, even assuming for the purposes of the argument that there is an arguable case for contraventions of Listing Rule 3.1.
MCI submitted that unsuccessful attempts to plead an arguable cause of action justify dismissal of proceedings only in very unusual circumstances. It pointed to cases where there was no sufficient pleading after more than three years.[37]
[37]Bishopsgate Insurance Australia Ltd (in liq) v Deloitte Haskins & Sells [1999] 3 VR 863; Latrobe Country Credit Co‑Operative Ltd v Smith [1999] 1 VR 440.
In my view, MCI ought not be given a further opportunity to plead a case. It has no real interest to prosecute. It purchased its shares before the alleged non‑disclosures and misleading or deceptive conduct occurred. In each of the four proposed pleadings, it has failed to articulate a viable claim. It has attempted to plead its case in various ways but has failed to propose a pleading that discloses a claim that has a reasonable prospect of success.
One might think that if the proceeding is dismissed there is a risk that other shareholders who might benefit from the proceeding as group members would be prejudiced by refusing to permit MCI another opportunity to plead. In that regard, MCI had applied to join another WorleyParsons’ shareholder as plaintiff. It no longer presses that application. Rather, following the hearing of this application, a separate group proceeding was instituted by that shareholder. The plaintiff in that case is represented by the same counsel who appeared in this proceeding. She is also represented by the same solicitor who acted at the commencement of this proceeding. The pleading is in similar form to that proposed by MCI on this application, save that she alleges that she purchased her shares in early August 2013. Consequently, any potential risk to which I have alluded is avoided.
Finally, I would add that in my opinion, the conclusion at which I have arrived is in accordance with the court giving effect to the overarching purpose of the Civil Procedure Act 2010 (Vic); that is, to facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute.[38] Here, MCI has no real interest to pursue in this litigation against WorleyParsons and it is appropriate to resolve the dispute now and to bring this litigation to an end before further costs and the time of the parties and the court are expended.
[38]Civil Procedure Act 2010 (Vic) ss 7(1), 8(1) and 9.
Conclusion
In the circumstances, I would dismiss the proceeding and, subject to submissions which either party may wish to make, would propose to order that costs follow the event, such that MCI pay WorleyParsons’ costs of and incidental to the proceeding.
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