Impiombato v BHP Group Limited

Procedural background 8 The procedural background to the present issue includes that the present proceeding is a consolidation of two proceedings that were commenced in 2018. The original proceedings were proceeding VID 649 of 2018 (commenced by Vince Impiombato, with Phi Finney McDonald as the instructing solicitors) and VID 1077 of 2018 (commenced by Klemweb Nominees Pty Ltd as trustee for the Klemweb Superannuation Fund, with Maurice Blackburn Lawyers as the instructing solicitors). Following a judgment of the Full Court of this Court on 21 June 2019 (Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) v BHP Group Limited [2019] FCAFC 107; 369 ALR 583), the two proceedings were consolidated and the originating application and a consolidated statement of claim were filed. The consolidated statement of claim was subsequently amended and the applicants' current pleading is the amended consolidated statement of claim (referred to in these reasons as the "statement of claim").

Overview of the proceeding 9 An overview of the proceeding is contained in my judgment on an interlocutory application filed by BHP Ltd relating to whether non-resident persons could be group members: see Impiombato v BHP Group Limited (No 2) [2020] FCA 1720 at [4]-[11].

Background facts 10 In Ms Tran's affidavit dated 19 October 2023, she gives evidence (which I accept for present purposes) that, during the Relevant Period: (a) BHP operated under a dual listed company structure with two parent companies, BHP Ltd and BHP Plc; (b) BHP Ltd was incorporated in Australia and BHP Plc was incorporated in the UK; (c) BHP Ltd had a primary listing on the ASX in Australia and its ordinary shares were admitted for quotation and trading on the ASX; and (d) BHP Plc had: (i) a premium listing on the UK Listing Authority's Official List and its ordinary shares were admitted to trading on the LSE in the United Kingdom; and (ii) a secondary listing on the JSE in South Africa. 11 Further, in the same affidavit, Ms Tran gives evidence on an information and belief basis (which I accept for present purposes) that, during the Relevant Period: (a) BHP Ltd was already admitted to the official list on the ASX and its ordinary shares were available for trading on the ASX and on other exchanges; (b) BHP Plc was already admitted to the official lists on the LSE and JSE and its ordinary shares were available for trading on the LSE and JSE respectively, and on other exchanges; (c) ordinary shares in BHP Ltd: (i) were (or had been) issued by BHP Ltd and were maintained by BHP Ltd on a share register that records the identity of the registered shareholders and buy/sell trading activities of those shareholders; (ii) could be and were traded on the ASX, being the primary trading platform or exchange; (iii) could be and were traded on other trading platforms or exchanges, sometimes referred to as secondary trading platforms, such as the exchange operated by Cboe Australia Pty Ltd; (d) ordinary shares in BHP Plc: (i) were (or had been) issued by BHP Plc and were maintained by BHP Plc on a share register (separate from the share register of BHP Ltd) that records the identity of the registered shareholders and buy/sell trading activities of those shareholders; (ii) could be and were traded on the LSE, being the primary trading platform or exchange; (iii) could be and were traded on the JSE, being the secondary trading platform or exchange; (iv) could be and were traded on other trading platforms or exchanges, such as the exchanges operated by BATS Chi-X Europe; (e) there was also a separate (secondary) register for trades in BHP Plc that occurred on the JSE, and those trades were reflected on the (South African) share register of BHP Plc; and (f) trades in ordinary shares in BHP Ltd and BHP Plc were reflected on the respective share registers, but (other than as set out in paragraph (e) above) the share registers do not record the platform upon which the trades occurred. 12 If and to the extent that the evidence in Mr Watson's affidavit dated 27 October 2023 differs from the evidence set out above, it appears that any differences are minor and are not material for present purposes. 13 In Mr Watson's affidavit of 15 October 2023, he gives evidence (which I accept for present purposes) that, during the Relevant Period: (a) Chi-X was an alternative trading platform for some shares in ASX-listed entities (which he refers to as "Australian securities"), as well as some other financial products, to the ASX. Shares purchased through Chi-X could be sold on the ASX and vice versa, provided that the stock was available on both platforms; (b) most online brokers enabled investors to trade Australian securities on Chi-X, including CommSec, NABTrade, Stake, Selfwealth, CMC Markets and Superhero. Generally, when executing a trade through these brokers, an investor would not specify whether the trade should be executed on Chi-X or the ASX. Rather, that was left to the broker's discretion as informed by their duty to comply with the best execution obligations set out in the ASIC Market Integrity Rules; (c) clearing and settlement of trades executed on Chi-X were facilitated by the ASX and would settle on an investor's CHESS HIN or directly with share registries in an identical fashion to those traded directly on the ASX. The ASX's Trade Acceptance Service and Settlement Facilitation Service operated to provide an Approved Market Operator (AMO), such as Chi-X, with centralised clearing and settlement services in an identical fashion to trades executed on ASX's cash equity market trading platform (known as ASX Trade); (d) specifically, ASX Clear, a wholly-owned subsidiary of ASX Ltd, provided clearing services to ASX participants. Chi-X, as an AMO, was entitled to have its trades accepted for clearing by ASX Clear on the same basis as those executed on ASX Trade. For both ASX Trade and Chi-X, ASX Clear acted as a central counterparty (CCP) for the trading of shares, warrants and exchange-traded funds. As a CCP, ASX Clear became liable for the completion of all clear transactions on the relevant market; (e) this occurred through a process of novation whereby the original market contract between the trading participant (being a broker authorised on the ASX's market) representing the buyer and the trading participant representing the seller was discharged and replaced with two new contracts: one between ASX Clear and the clearing participant (being a broker authorised to clear trades through the ASX Clearing House) representing the buyer, and the other between ASX Clear and the clearing participant representing the seller. In this way, ASX Clear became the counterparty assuming the credit risk; and (f) as with trades executed on ASX Trade, trades executed on Chi-X were submitted to ASX Clear for registration. Once accepted by ASX Clear, by way of novation, each cash market trade was replaced with a cash market CCP transaction between each participant and ASX Clear. Where the cash market trade was cleared on both sides by the same clearing participant, there was no need for novation and the participant received notification of the trade. Accordingly, a buyer's interest in a share acquired through a Chi-X placed trade was indistinguishable from one placed directly through the ASX Trade. 14 In Mr Watson's affidavit of 27 October 2023, he gives evidence (which I accept for present purposes) that, during the Relevant Period: (a) unlike the ASX, Chi-X did not maintain an official list to which corporations could be or were admitted. Rather, Chi-X operated an alternate facility through which Australian securities could be and were traded. No other platform offered this facility during the Relevant Period. Australian securities purchased through Chi-X could be sold through the ASX, and vice versa; (b) ordinary shares in BHP Ltd could be, and were, traded on the Chi-X trading platform. However, BHP Ltd was not "listed" on Chi-X, in the terminology of Australian corporations law; (c) clearing and settlement of trades in Australian securities executed on Chi-X were facilitated by the ASX, in the same manner as trades in Australian securities executed on the ASX's trading platform. ASX Ltd, through its wholly-owned subsidiaries ASX Clear Pty Ltd and ASX Settlement Pty Ltd, was the only licensed operator of clearing and settlement facilities for trades in Australian securities. The use of this clearing and settlement arrangement was a condition of the Australian Market License held by Chi-X; (d) clearing and settlement was conducted by the ASX through its Clearing House Electronic Subregister System (CHESS), which combined settlement services with an electronic CHESS subregister that recorded the ownership details of Australian securities; and (e) shareholdings registered on the CHESS subregister were communicated to the issuer sponsored subregister (in the case of BHP Ltd, its subregister in maintained by ComputerShare Pty Ltd) and vice versa, such that both subregisters contained a complete and consistent record of members and their shareholdings.

Consideration 15 The applicants focus on the group member definition in the originating application, which refers to acquiring an interest in shares. They accept that one needs to then go to the statement of claim for the definition of BHP ASX Shares, BHP LSE Shares and BHP JSE Shares. The applicants submit that, when one does so, BHP ASX Shares are defined as meaning "fully paid up ordinary shares in … the Respondent … on the Australian Securities Exchange". The applicants submit that the word "on" in the definition attaches to the entity (BHP Ltd). The applicants also submit that the definition refers either to the entity (BHP Ltd) being listed on the ASX, or to the ordinary shares in BHP Ltd being quoted (or listed) on the ASX. The applicants submit that BHP LSE Shares and BHP JSE Shares are defined in a comparable way. 16 The applicants submit that it would make no sense to carve out persons who acquired their shares on other trading platforms. The applicants rely on evidence that, at all times since the commencement of this proceeding, the applicants' intention has been to bring a proceeding on behalf of all persons who acquired an interest in shares in BHP Ltd or BHP Plc during the Relevant Period. The applicants contend that BHP Ltd has conducted the proceeding on the basis that the group member definition includes persons who acquired shares on other platforms. The applicants submit that, if there is any ambiguity, it should be resolved in favour of the applicants' interpretation, to avoid a multiplicity of proceedings, consistently with the objects of Pt IVA of the Federal Court of Australia Act 1976 (Cth). 17 BHP Ltd submits that the terms of paragraph 3 of the statement of claim are crystal clear. BHP Ltd submits that the word "on" in each of sub-paragraphs (i), (ii) and (iii) of paragraph 3(a) qualifies the acquisition referred to in the opening lines of paragraph 3(a); thus, the acquisition must have taken place on the relevant exchange. BHP Ltd submits that the group member definition is therefore confined to on-market transactions through the three platforms the applicants have specified. To the extent that the applicants contend that their intention was otherwise, BHP Ltd submits that they have failed to execute their intention. BHP Ltd submits that: the definition of group members in the originating application is not free-standing and needs to be read with the definition in the pleading; for example, Relevant Period is defined in the statement of claim; the originating application states on p 2 that capitalised terms have the same meaning as in the consolidated statement of claim. BHP Ltd submits that the words in the statement of claim have been carefully chosen; if the word "on" meant quoted on, or listed on, the relevant exchange, the words "on the Australian Securities Exchange" would not have been necessary. 18 In my view, for the reasons that follow, BHP Ltd's interpretation of the group member definition is to be preferred. 19 Section 33H(1)(a) of the Federal Court of Australia Act provides that: (1) An application commencing a representative proceeding, or a document filed in support of such an application, must, in addition to any other matters required to be included: (a) describe or otherwise identify the group members to whom the proceeding relates; … 20 Thus, the group member definition may be contained in an originating process or in a statement of claim. 21 Here, both the originating application and the statement of claim contain a group member definition, expressed in different terms. It is apparent that the definition appearing in the originating application is only an abbreviated definition; it uses expressions that are defined in the statement of claim and does not contain the same level of detail as the definition in the statement of claim. The statement of claim, on the other hand, contains a complete definition. In these circumstances, it is necessary to focus on the definition in the statement of claim. 22 I consider that it is necessary to consider both the text and the context of the group member definition. 23 The text of the group member definition in the statement of claim favours BHP Ltd's interpretation. Paragraph 3(a)(i) provides that group members are persons who, during the Relevant Period, "entered into a contract … to acquire an interest in … ordinary shares in … the Respondent … on the Australian Securities Exchange". I consider that the natural way to read this is that the shares were acquired on the ASX (that is, through trading on the ASX). In other words, the word "on" qualifies the acquisition. It is strained to read these words as meaning that BHP Ltd is listed on the ASX or that its shares are quoted on the ASX. The same points apply in relation to paragraph 3(a)(ii) and (iii). 24 The context of the group member definition in the statement of claim includes the rest of the pleading. In my view, a consideration of the balance of the pleading supports BHP Ltd's interpretation. The pleading contains a definition of the BHP ASX Share Market (in paragraph 5(c)), the BHP LSE Share Market (in paragraph 8(a)) and the BHP JSE Share Market (in paragraph 8(b)). These markets then form the basis for a substantial part of the causation pleading in section L of the statement of claim (paragraphs 68-80). In broad terms, it is alleged that the pleaded contraventions caused the price at which the relevant shares traded on the ASX, the LSE and the JSE to be higher than their true value or the market price that would have prevailed but for the contraventions. These pleadings appear to be predicated on group members having purchased their shares on one of those exchanges. No other platforms are pleaded or referred to. 25 Insofar as the applicants contend that it was always their intention to cover all persons who acquired an interest in shares in BHP Ltd or BHP Plc during the Relevant Period, I consider that the issue of interpretation needs to be approached objectively (in other words, looking at the words used in context) rather than subjectively. 26 Insofar as the applicants submit that it would make no sense to carve out persons who acquired their shares on other trading platforms, I do not accept that submission. Having regard to the causation pleading referred to above, there does appear to be a logic to defining the class by reference to acquisition of the relevant shares on the ASX, the LSE or the JSE. 27 Insofar as the applicants submit that BHP Ltd has conducted the proceeding on the basis that the group member definition includes persons who acquired shares on other platforms, it is not clear that that is correct. Some of the materials filed by BHP Ltd mirror the group member definition in the statement of claim: see, for example, paragraph 5 of the affidavit of Jason Betts dated 26 June 2020, which is annexed to Mr Watson's affidavit dated 15 October 2023 (see p 40 of that affidavit). See also paragraph 11 of Ms Tran's affidavit dated 19 October 2023. 28 Insofar as the applicants contend that their interpretation is to be preferred because it avoids a multiplicity of proceedings, while this is a general objective of the representative proceeding provisions, I do not consider it to be of assistance in resolving the present issue of interpretation. 29 Insofar as the applicants rely on the fact that clearing and settlement of trades executed on Chi-X were facilitated by the ASX in the way described above, I do not consider this to assist the applicants' position. In my view, it would be inapt to describe a trade executed on Chi-X that is cleared and settled by the ASX (or its subsidiaries) as an acquisition "on the ASX". It is, rather, aptly described as an acquisition "on Chi-X". 30 In light of the above, I consider the correct interpretation of the group member definition to be that it covers persons who, during the Relevant Period, entered into a contract to acquire an interest in: fully paid-up ordinary shares in BHP Ltd through trading on the ASX; and/or fully paid-up ordinary shares in BHP Plc through trading on the LSE or the JSE. I consider that the relevant paragraph of the opt-out notice should be worded in this way. 31 I do not consider it necessary to include in the opt-out notice an additional sentence, as proposed by BHP Ltd, to the effect that: "For the avoidance of doubt, the definition of Group Members excludes persons who purchased shares during the Claim Period on other trading platforms, exchanges or venues, for example, the Chi-X trading platform (as it was known at the time)." I consider it sufficient to describe group members as set out in the preceding paragraph. 32 I will make an order that the applicants confer with the respondent and provide to the Court a revised draft of the opt-out notice that reflects these reasons for judgment. I will reserve the issue of costs. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky.