Big Australian denied stay application as BHP shareholder case continues

This is a shareholder class action arising out of representations made, and information alleged not to have been disclosed, in relation to a mining operation in Brazil.

This is a shareholder class action arising out of representations made, and information alleged not to have been disclosed, in relation to a mining operation in Brazil in which the respondent held a 50% interest, prior to a catastrophic dam collapse which resulted in substantial damage (including several fatalities), the closure of the mining operation, and a consequent significant fall in the respondent’s share price.

Those events have (in addition to a myriad of other civil proceedings in Brazil, the United States and the United Kingdom) resulted in criminal proceedings being instituted in Brazil against several corporate entities associated with the mining operation, as well as against many individuals. Although the criminal proceedings against the relevant individuals have been dismissed, those dismissals are, for the most part, the subject of appeals which remain extant. Many of those same individuals are likely to be key witnesses in the current proceeding.

The respondent applied for this proceeding to be stayed, pending the conclusion of the criminal proceedings in Brazil. In support of that application, the respondent led extensive evidence of:

  • the ongoing criminal proceedings in Brazil (as well as the myriad of past and ongoing civil proceedings);
  • the importance of the relevant individuals to its defence of the current proceeding;
  • the fact that those individuals were presently unwilling to provide evidence or otherwise cooperate with or assist the respondent in its defence of this proceeding, until the criminal proceedings against them were concluded, for fear that anything they say or do might be used against them (or against their former colleagues) in the criminal proceedings, thereby jeopardising their right to silence and their privilege against self-incrimination;
  • the fact that, if this proceeding were allowed to continue, it might result in the disclosure of material which would prejudice the defence of the criminal proceedings in Brazil; and
  • therefore, the prejudice it (and others) would suffer if this proceeding were allowed to continue.

At [121] and following, Moshinsky J addressed the principles applicable to an application to stay a civil proceeding pending the determination of criminal proceedings relating to the same subject matter, including:

  • that the court has a wide jurisdiction to stay proceedings in the interests of justice;
  • a plaintiff is prima facie entitled to have his, her or its civil action tried in the ordinary course and a stay therefore requires justification on proper grounds (with the applicant for a stay bearing the burden of demonstrating proper grounds);
  • a court will not grant a stay of a civil proceeding merely because related charges have been brought against an accused and criminal proceedings are pending, but a stay of the civil proceeding may be warranted if it is apparent that the accused is at a real risk of prejudice in the conduct of his, her or its defence in the criminal trial;
  • the possibility of protective orders being made (such as an order under s 128 of the Evidence Act 1995 (Cth) or a non-publication or suppression order) is not an adequate protection against the risk of prejudice to the accused;
  • relevant prejudice to a party in the civil proceeding may arise from the existence of the criminal proceeding even in circumstances where there is not a strict identity between the applicant for the stay of the civil proceeding and the criminal accused – there may, for example, be relevant prejudice where the criminal accused, although not a party to the civil proceeding, would be a lay witness in that proceeding – in such circumstances, the criminal accused’s invocation of the privilege against self-incrimination and the right to silence may deprive a party to the civil proceeding of assistance or evidence that is critical or very important to its claim or defence;
  • prejudice to an accused who is not a party to a civil proceeding may be a relevant consideration in considering whether or not to grant a stay of the civil proceeding;
  • the risk of prejudice identified by an applicant for a stay must be weighed against the prejudice that a stay of the civil proceeding would occasion;
  • (needless to say) each case must be judged on its own merits; and
  • in an appropriate case, the proceeding may be allowed to proceed to a certain stage, e.g. setting down for trial, and then stayed.

His Honour ultimately concluded that, in the particular circumstances of this case, a stay of the entire proceeding was not justified at the present time (and therefore that the respondent’s application should be dismissed), but that the matters relied upon by the respondent could be considered in determining whether or not particular interlocutory steps in the proceeding ought be allowed to take place, and if so, in what form (at [11], see also at [142]ff):

… In summary, while the matters raised by [the respondent] have some force as regards the trial of the proceeding, and may also have some force regarding certain of the interlocutory steps, I am not persuaded that the interests of justice require a stay of all interlocutory steps. In my view, the preferable approach in the circumstances of this case is to consider, in the course of managing the proceeding, whether particular interlocutory steps should be ordered, and the appropriate form of any such orders, having regard to the matters raised by [the respondent] in connection with this application. [emphasis in original]

Case details

Impiombato v BHP Group Ltd [2020] FCA 350

  • Federal Court of Australia, Moshinsky J, 17 March 2020
  • Applicants’ Solicitors: Maurice Blackburn / Phi Finney McDonald
  • Respondent’s Solicitors: Herbert Smith Freehills
  • Applicant’s Funder: N/A

Read more about this case on Austlii: Impiombato v BHP Group Ltd [2020] FCA 350

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