Group members have important win in BHP action

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This judgment concerned an application brought by the applicants seeking leave to amend:

• the class member definition contained in the Consolidated Originating Application and Amended Consolidated Statement of Claim; and
• the loss and causation pleading in the COA and the ACSOC (the Applications).

The applicants also sought to have the amendments relate back to the commencement of the proceeding (Relation Back).

Background

Class members are defined in the COA and ACSOC as those who, inter alia, entered into a contract during the claim period to acquire an interest in BHP ASX, BHP LSE or BHP JSE shares (emphasis added).

In Impiombato v BHP Group Ltd (No 4) [2023] FCA 1354 Moshinsky J held (at [30]) that the class definition in the COA and ACSOC excluded those persons who acquired an interest in BHP through trading only on secondary share trading platforms (ie Chi-X Australia, BATS Chi-X Europe) (Excluded Shareholders).

The application to amend dealt with in this judgment follows Moshinsky J’s findings in Impiombato (No 4).

Basis for Amending

The applicants argued that leave should be granted to correct a lawyers’ drafting error and to give effect to the applicants’ original intention.

The respondent did not oppose the amendment, but did oppose the Relation Back, on the basis that the evidence adduced was insufficient to demonstrate a mistake (see [9]-[10]).

Applicants’ Intention

The lawyers for the applicants deposed that they always intended that the class definition cover all persons who acquired an interest in BHP shares, irrespective of the trading platform (see [33]).

Justice Murphy held that the applicants’ evidence on intention was “insufficient to support a conclusion either way” (at [54]). However, his Honour later clarified that the conflicting documentation did not reduce the probative relevance of the applicants’ evidence, since the respondent made a ‘calculated’ decision not to cross-examine (at [139] and [142]).

Prejudice

For Excluded Shareholders, the applicants submitted that prejudice would be suffered because they would be unable to seek a benefit from any settlement or judgment in the proceeding. Further, Excluded Shareholders would not have taken any steps to preserve their rights against the respondent outside the proceeding, because putative class members had reasonable grounds to believe they were class members in the proceeding, up until 2 June 2023, when BHP had sought “clarification of the parameters of the class” (see [25]).

For existing class members, his Honour summarised the evidence of prejudice as follows:

[78] … He [Mr Myers] said they will be prejudiced because it is likely that they will face:

• significant burden of undertaking fact intensive enquiries to identify the trading platform on which trades were executed to demonstrate their group membership and eligibility for compensation;
• significant costs and delay associated with such enquiries;
• added complexity for opt out, registration and any class closure;
• a chilling effect on group member registration; and
• significant additional complexity for the applicants’ lawyers in estimating the potential value of the claims in the proceeding, which will delay and will make it more difficult for the parties to reach a settlement at any mediation.

The respondent’s evidence in reply was summarised by his Honour (at [89]) (italicised emphasis in original; bolded emphasis added):

I found her [Ms Tran’s] evidence that:

• group members may know the trading platform upon which their BHP Shares were acquired, because of instructions they gave to their dealer/broker;
• group members’ brokers might not have access to multiple trading platforms, and therefore the enquiries required would not be lengthy or burdensome; and
• group members’ brokers may continue to hold electronic records of trades made given the applicable record-keeping requirements…

both uncertain and self-servingly optimistic.

Findings on Prejudice

His Honour held (at [154]) that the Excluded Shareholders were outside the scope of the class definition due to a lawyers’ drafting error. The respondent was incorrect to contend that Excluded Shareholders were barred as a result of the “operation of the Part IVA scheme and the public policy underpinning limitation periods”.

His Honour­, despite these findings, held that consideration of the prejudice to Excluded Shareholders did not “carry substantial weight in the exercise of the discretion” to allow the amendment with Relation Back (at [155]). This is because the Excluded Shareholders “are not, and never have been, group members in the proceeding”. Instead, his Honour was ‘moved’ to allow the amendment with Relation Back on the basis that “… prejudice [is] likely to be suffered by existing group members”.

The respondent argued two species of prejudice. Firstly, that the amendment, with Relation Back, would expand their potential aggregate liability in the proceeding. In that regard his Honour held:

[182] … I accept that inclusion of Excluded Shareholders’ claims is likely to increase BHP’s potential aggregate liability in the proceeding. I am not, however, persuaded that the increase in BHP’s potential liability will be as substantial as it suggests, nor that the prejudice to BHP will be as great as it submits.

The respondent deposed that a further 3.3 billion shares would be introduced into the proceeding if the amendment was allowed (see [183]). His Honour regarded such an approach as ‘simplistic’, because Mr Myers’ evidence showed that all but one major Australian retail broker had access to multiple trading platforms (at [183] and [185]). It was therefore likely that (emphasis added):

[186] … many of the 3.3 billion BHP Shares that were acquired on secondary platforms during the Relevant Period were acquired on behalf of persons who are existing group members. If that is the case, the expansion in the class and the resultant prejudice to BHP is likely to be significantly less substantial than its submissions suggest. As I later explain, I consider it to be plain that existing group members should have leave under r 16.53 to claim any further losses they have suffered through the acquisition of further BHP Shares on secondary trading platforms.

On the second species of asserted prejudice, his Honour held that allowing the amendment with Relation Back did not prevent the respondent from raising a limitations defence (at [191]). His Honour’s view was that the respondent could raise a limitations defence at the appropriate interlocutory stage, irrespective of his finding on the amendment with Relation Back.

Decision

Ultimately, his Honour:

[14] … consider[ed] it to be appropriate in the interests of justice in the proceeding to grant leave for the proposed amendments and for the amendments to take effect from the commencement of the proceeding.

Impiombato v BHP Group Limited (No 5) [2024] FCA 591

Federal Court of Australia, Murphy J, 6 June 2024
Applicants’ Solicitors: Phi Finney McDonald & Maurice Blackburn
Respondent’s Solicitors: Herbert Smith Freehills
Applicants’ Funder: N/A

AustLII link

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