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This is a shareholder class action in relation to BHP Group Ltd’s (BHP Ltd) alleged failure to inform the market of the risk that a dam at its Germano mine joint venture in Brazil might collapse. The catastrophic collapse of the dam in November 2015 resulted in substantial property damage, several fatalities, the closure of the mining operation, and a significant fall in BHP Ltd’s share price.

This decision concerned an application for leave to appeal by BHP Ltd from the decision of Moshinsky J in Impiombato v BHP Group Ltd (No 2) [2020] FCA 1720, in which his Honour refused BHP Ltd’s application for:

  • a declaration that Pt IVA of the Federal Court of Australia Act 1976 (Cth) (FCAA) does not permit the bringing of claims on behalf of persons who are not residents of Australia (non-residents) (Issue 1);

  • alternatively, a discretionary order excluding non-residents from the class definition (Issue 2); and

  • an order striking out the claims of class members who acquired shares in BHP Group plc (BHP Plc) on the London and Johannesburg stock exchanges (Issue 3). Claims are brought on behalf of such class members because, at all material times, BHP Ltd and BHP Plc had a dual listed company structure and operated as a single entity. Any contraventions by BHP Ltd of its continuous disclosure obligations are alleged to have had an equivalent effect on the share price of BHP Plc, and thus caused shareholders of BHP Plc equivalent losses. BHP Plc, however, is not a party to the proceeding and is not alleged to have contravened any relevant obligations. 

The Full Court dismissed BHP Ltd’s appeal on all three issues. While the Court granted leave to appeal in relation to Issue 1, it rejected BHP Ltd’s arguments for several reasons, including the following:

  • The Court rejected BHP Ltd’s submission that Pt IVA confers jurisdiction on the Court over the claims of persons who are non-parties (i.e. class members). Rather, it said that Pt IVA “establishes powers and procedures by which the Court can exercise jurisdiction over matters otherwise conferred upon it provided the “gateway” provisions are surmounted” (at [32]). The Court also observed that Pt IVA allows for the grouping of claims that exist separately from the proceeding. As such, Pt IVA is about the exercise (and not the conferral) of jurisdiction.

  • The Court also rejected BHP Ltd’s related submission that upon a proper construction of Pt IVA, there is nothing which rebuts the common law presumption that the legislature of a country does not normally intend to deal with persons or matters over which jurisdiction properly belongs to some other sovereign or state. Because Pt IVA concerns the exercise (and not the conferral) of jurisdiction, the Court held that the presumption did not assist BHP Ltd. It observed that “[t]he manner of exercise of a jurisdiction conferred on an Australian court is not, obviously enough, a matter where it might be thought jurisdiction properly belongs to a foreign sovereign or state” (at [43]).

  • The Court said that there was nothing in the text or context of Pt IVA which evinced an intention to exclude non-residents from being class members. To the contrary, the Court found that when Parliament enacted Pt IVA it had made a legislative choice not to exclude non-residents. Furthermore, while BHP Ltd contended that  a non-resident cannot be a class member under Pt IVA, it accepted that a non-resident with a claim under federal jurisdiction may nonetheless advance their claim by: (i) being named as a party in a Pt IVA representative proceeding, (ii) commencing an ordinary inter partes proceeding in their own name, (iii) being a represented party in a Chancery rule representative proceeding under r 9.21 of the Federal Court Rules 2011 (Cth), or (iv) being a class member in a class action commenced in the Supreme Court of Victoria (with that Court exercising federal jurisdiction). The Court observed that “[t]o say that this would be a surprising outcome is somewhat of an understatement” (at [50]).

  • The Court found that BHP Ltd’s focus on the role of non-residents as class members for the purpose of the jurisdictional question was misplaced, and inverted the usual inquiry, which is to the Court’s ability to exercise power over the defendant. After reviewing relevant authority, including in particular the High Court’s decision in Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1; [2002] HCA 27, the Court concluded that “[o]n the state of the law in this country, where jurisdiction is attracted by service on the respondent within the territorial jurisdiction of the court, it is not necessary to show any other connexion with the jurisdiction” (at [63]).

In relation to Issue 2, the Court refused leave to appeal. Although the Court acknowledged that the presence of non-resident class members gave rise to some risk of re-agitation of the same issues in subsequent foreign proceedings, it identified that there are other, less drastic, options available to deal with this potential prejudice than the exclusion of non-residents from the class definition. For example, the Court indicated that a class closure order may be made at a future stage of the proceeding. In relation to the power to make such an order, the Court acknowledged that recent decisions of the New South Wales Court of Appeal stand for the proposition that class closure orders that give rise to a contingent extinguishment of class members’ rights of action are beyond power (Haselhurst v Toyota Motor Corporation Australia Ltd (2020) 101 NSWLR 890; [2020] NSWCA 66 and Wigmans v AMP Ltd (2020) 102 NSWLR 199; [2020] NSWCA 104). However, the Court also drew attention to Beach J’s recent decision in Wetdal Pty Ltd as Trustee for the BlueCo Two Superannuation Fund v Estia Health Ltd [2021] FCA 475, in which his Honour queried the correctness of those decisions, and said (at [95]):

Although there is, with respect, much to be said for Beach J’s observations in Wetdal (at [81]–[95]) as to Wigmans and Haselhurst, in our view, on any view of the law, an order could be fashioned if and when it did become necessary or appropriate to ensure that justice was done to ensure that BHP was not vexed with the prospect of non-resident group members, who do not take a step to prosecute their claim in this class action, having the ability to commence another proceeding in another jurisdiction.

Finally, the Court also refused leave to appeal in relation to Issue 3. It held that there was no arguable error in the primary judge’s finding that the question of whether s 674 (read together with ss 1317HA or 1325) of the Corporations Act 2001 (Cth) accommodates the claims of BHP Plc shareholders should be determined at trial.

The High Court has now granted BHP special leave to appeal and the appeal will be heard in June this year.

BHP Group Ltd v Impiombato [2021] FCAFC 93

Full Court of the Federal Court of Australia, Middleton, McKerracher and Lee JJ,
3 June 2021

Appellant’s Solicitors: Herbert Smith Freehills;
Respondents’ Solicitors: Phi Finney McDonald and Maurice Blackburn Lawyers;
Respondents’ Funders: N/A (Maurice Blackburn)/KTMC Funding LLC (Phi Finney McDonald)

Austlii Link: Accessible here

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