Group member definition dispute in BHP securities action

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This judgement concerned an issue of interpretation between the parties of the group member definition in paragraph 3(a) of the applicants' statement of claim. The issue of interpretation regarded whether the group member definition covered persons who entered into contracts to acquire BHP Ltd or BHP Plc shares on trading platforms other than the ASX, LSE or JSE, in particular Chi-X (now Cboe Australia). Broadly, the respondents sought to exclude persons who acquired shares through Chi-X, or any other non-ASX platform, arguing they did not fall within the group member definition, whilst the applicants contended that such persons did fall within the definition.

The applicants contended further that, in any event, if there was any doubt about the construction, it was unnecessary to resolve the issue for the purpose of approving an opt out notice and the issue could be deferred until trial. Further, given the capacity to affect the substantive rights of persons by excluding them from the proceeding, the applicants contented that should only be done on full evidence and submissions rather than at a case management hearing to approve an opt-out notice. However, Moshinsky J did not consider this a practical approach and sought to ensure the opt-out notice stated with clarity who is covered by the group member definition, and thus heard the argument.

By way of background, during the Relevant Period, BHP operated under a dual listed company structure, with two parent companies, BHP Ltd and BHP Plc. BHP Ltd was incorporated in Australia and had a primary listing on the ASX equities market. BHP Plc was incorporated in the UK and had a primary listing on the LSE equities and a secondary listing on the JSE equities market. In Australia, ordinary shares in BHP Ltd listed on the ASX could be traded through ASX operated platforms such as ASX Trade and ASX PureMatch, but also could be traded through other trading platforms not operated by ASX, such as Chi-X, that interface directly with the ASX equity market.

BHP Ltd shares purchased through Chi-X could be sold on ASX owned platforms, and vice versa. Evidence was led by the applicants that group members would likely not have known which platform was used to execute trades, as trades placed on brokerage software were automatically allocated to the best available deal, regardless of which platform was used to acquire the share. Furthermore, the joint applicants contended that trades executed on Chi-X were cleared and settled in an identical manner to those directly traded on ASX operated platforms, via the ASX’s Trade Acceptance Service and Settlement Facilitation Service. Therefore, the group member’s interest remained the same, regardless of whether they bought BHP Ltd shares through ASX or Chi-X.

The group member definition as expressed in paragraph 3(a) of the applicants’ statement of claim relevantly defines group members as all persons who or which:

• (a) during the period … entered into a contract … to acquire an interest in fully paid-up ordinary shares in:
  • i. … BHP Ltd, on the Australian Securities Exchange (ASX), a financial market operated by the Australian Exchange ASX Limited (the BHP ASX Shares);
  • ii. BHP Group Plc… on the London Stock Exchange (LSE), a financial market operated by the London Stock Exchange Group Plc (the BHP LSE Shares); and/or
  • iii. BHP Plc on the Johannesburg Stock Exchange (JSE), a financial market operated by the Johannesburg Stock Exchange Limited (the BHP JSE Shares)
    (emphasis added)

BHP submitted that the word “on” qualifies the acquisition referred to in the opening lines of paragraph 3(a); thus, the acquisition must have taken place on the relevant exchange, confining the definition to on-market transactions through the three platforms specified by the applicants.

The applicants submitted that BHP ASX Shares are defined as meaning “fully paid-up ordinary shares in … the Respondent … on the Australian Securities Exchange” and that the word “on” in the definition attaches to the entity (BHP Ltd). They emphasised that excluding individuals who acquired shares on other trading platforms would be illogical, noting their intention throughout the proceedings was to represent all persons who obtained shares in BHP Ltd or BHP Plc during the relevant period. The applicants argued that to the extent that there exists any ambiguity in the group member definition, it ought to be resolved in their favour to avoid a multiplicity of proceedings, aligning with the objectives of Pt IVA of the Federal Court of Australia Act 1976 (Cth) (FCAA). They also submitted that the description of group members in the applicants’ originating application was concerned with identifying the relevant shares which must have been acquired for the purposes of group membership rather than by the platforms used to acquire those shares. Accordingly, the statement of claim ought to be read in a consistent fashion.

BHP Ltd responded that the applicants failed to execute their intention in paragraph 3(a), emphasising that the words in the statement of claim were carefully chosen; if the word “on” meant listed on the relevant exchange, the words “on the Australian Securities Exchange” would not have been necessary.

Moshinsky J sided with BHP’s interpretation of the group member definition, quoting s 33H(1)(a) of the FCAA “a document filed in support of such an application, must … describe or otherwise identify the group members to whom the proceeding relates”. His Honour found that:

• It was necessary to focus on the definition provided in the statement of claim, contending that the natural reading of the text is that the shares were acquired on the ASX. In other words, the “on” qualifies the acquisition.
• The pleadings included a definition of the ASX Share Market, the LSE Share Market and JSE Share Market, forming the basis of the applicants’ causation pleading. The pleadings appear to be centred on group members having purchased their shares on one of those exchanges. No other platforms are pleaded or referred to.
• An objective approach was necessary to interpret the group member definition, focusing on the words used in context. Whilst the applicants believed it made no sense to carve out persons who acquired shares on other trading platforms, his Honour decided there was logic to defining the class by reference to the acquisition of shares on the ASX, LSE or JSE exclusively. His Honour rejected that the respondents had conducted the proceedings on the basis the definition extended to other trading platforms.
• It would be inapt to describe a trade executed on ChiX which is cleared and settled by the ASX, as an acquisition of the ASX. Rather, it is aptly described as an acquisition on Chi-X.

As such, his Honour decided that the group member definition excludes persons who acquired an interest in a BHP Ltd or BHP Plc share through any trading platform or exchange other than the ASX, LSE or JSE. His Honour made orders requiring the parties to confer and provide the Court with a revised draft of the opt-out notice reflecting the judgment.

_{[Postscript: The applicants have since filed an application seeking leave to appeal from the judgment and a separate application for leave to amend their pleadings to clarify the group member definition. The application to amend also seeks that any amendment to the group member definition ought to take effect from the date of commencement rather than the date of amendment.]}

Impiombato v BHP Group Limited (No 4) [2023] FCA 1354

Federal Court of Australia, Moshinsky J,
3 November 2023

Applicants’ Solicitors: Maurice Blackburn and Phi Finney McDonald
Respondent’s Solicitors: Herbert Smith Freehills
Plaintiff’s Funder: G&E KTMC Funding LLC

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