John Bridgeman Limited, in the matter of John Bridgeman Limited v National Stock Exchange of Australia Limited

The HML shares referred to in (c) above were shares in Henry Morgan Limited, in respect of which Bridgeman was in the process of making an off-market takeover offer at the time of the Suspension Decision. 5 Further details of each of these heads of loss and damage were provided in the succeeding paragraphs of Bridgeman's statement of claim. First, in respect of its "increased costs of borrowed funds" head of damage, it pleaded that (at [28]-[29]): 28 [Bridgeman] is currently undertaking a debt capital raising to raise $14 million (the Borrowings). 29 As a consequence of the Suspension Decision: (a) the rate of interest payable on the Borrowings has increased by 4% p.a; and (b) the interest payable on the Borrowings will be $560,000 p.a. greater than it would have been but for the Suspension Decision. (Emphasis in original) 6 Next, with respect to its "loss of value of investment management business" head of damage, it pleaded that (at [32]): As a consequence of the Suspension Decision, the value of [Bridgeman's] investment management business has decreased as clients have moved their investment funds from under [Bridgeman's] management. 7 Finally, with respect to its "Lost opportunity - value of HML shares" head of damage, it pleaded that (at [34]-[36]): 34 At the time of the HML Takeover Bid, trading in shares issued by HML was suspended by the Australian Securities Exchange (ASX). 35 One of the benefits of the HML Takeover Bid to HML shareholders was that, if HML's shareholders accepted the HML Takeover Bid, they would obtain Securities which could be traded on the Exchange. 36 Upon the making of the Suspension Decision, the HML Takeover Bid no longer had that benefit. (Emphasis in original) 8 In its defence, the NSX denied all of the allegations of breach made against it and it denied that Bridgeman had suffered any loss or damage as a result of the Suspension Decision. In respect of the allegations in Bridgeman's statement of claim concerning the circumstances of the Suspension Decision (see at [3] above), the NSX (at [19]): (a) admit[ted] the allegation in paragraph 19(a); (b) [said] that: (i) on 10 April 2019 at approximately 10.00 am, a meeting was held between Greg Fitzpatrick (Head of Market Operations), Ellen Morsley (Head of Compliance), Ron Kaushik (Senior Manager Surveillance), Ingrid Wei (Surveillance Analyst) and Zoran Grujic (Head of Finance) (the First Meeting); (ii) the First Meeting was called to discuss the financial position and solvency of [Bridgeman], not the suspension of [Bridgeman]; Particulars Calendar invitation sent by Mr Kaushik to Mr Fitzpatrick, Ms Morsley, Ms Wei and Mr Grujic on 10 April 2019 at 9.29am titled "JBL - Determine Solvency". (iii) during the First Meeting, it was agreed that the [NSX] did not know enough about [Bridgeman's] solvency to justify suspension based on solvency concerns alone; (iv) on 10 April 2019 at approximately 12.55 pm, Ann Bowering (former CEO of the [NSX]), Mr Kaushik, and Mr Fitzpatrick (via the "trading@nsx.com.au" email address) received an email from a complainant (Complainant A) which attached a 3-page letter setting out their concerns with regard to [Bridgeman]; (v) on 10 April 2019 at approximately 12.26 pm, Mr Kaushik spoke to a complainant (Complainant B) via telephone about their concerns with regard to [Bridgeman]; (vi) following his call with Complainant B, at 1.04 pm Mr Kaushik sent an email to Mr Fitzpatrick, Ms Morsley and Ms Wei summarising the discussion that he had with Complainant B; (vii) following receipt of the emails and further discussion with Ms Morsley, Mr Fitzpatrick formed the view that suspension of the Securities was necessary to protect investors and to ensure the fair, orderly and transparent operation of the market while further enquiries were made of [Bridgeman]; (viii) Mr Fitzpatrick communicated that view to Ms Morsley and she agreed that the Securities should be suspended; (ix) at approximately 3.15 pm, Mr Fitzpatrick, Ms Morsley and Ms Bowering met to discuss [Bridgeman's] suspension (the Second Meeting); (x) during the Second Meeting, Mr Fitzpatrick communicated to Ms Bowering his view that the Securities ought to be suspended and she agreed; (xi) at the end of the Second Meeting Mr Fitzpatrick made the decision to suspend the Securities (the Suspension Decision); (c) admit[ted] the allegation in paragraph 19(b) and repeat[ed] and relie[d] on the matters pleaded in sub-paragraphs (b)(i)-(iii); (d) admit[ted] the allegation in paragraph 19(c) and repeat[ed] and relie[d] on the matters pleaded in sub-paragraphs (b)(i)-(iii) above; (e) admit[ted] the allegation in paragraph 19(d); (f) admit[ted] the allegation in paragraph 19(e); (g) admit[ted] the allegation in paragraph 19(f) and repeat[ed] and relie[d] on the matters pleaded in sub-paragraphs (b)(vii)-(xi) above; (h) admit[ted] the allegation in paragraph 19(g) and repeat[ed] and relie[d] on the matters pleaded in sub-paragraphs (b)(vii)-(xi) above; (i) admit[ted] the allegation in paragraph 19(h). (Emphasis in original) 9 As for Bridgeman's claimed heads of damage, the NSX responded that it (at [27]): … (a) does not know and does not admit the allegation that [Bridgeman] has suffered loss and damage as a consequence of the Suspension Decision; (b) denies that it is liable for any loss and damage (which is not admitted) which may have been sustained by [Bridgeman] as a consequence of the Suspension Decision, for the reasons pleaded above; (c) alternatively, if the Suspension Decision was made in breach of Listing Rule 2.18 and/or the Implied Terms as defined by [Bridgeman] in its Statement of Claim (which is denied), the [NSX] denies that it is liable for any loss and damage sustained by [Bridgeman] after 24 September 2019, or alternatively 1 October 2019, because of the Subsequent Suspension Decisions. 10 The Subsequent Suspension Decisions referred to in (c) above were pleaded earlier in NSX's defence as follows (at [26]): The [NSX] admits the allegation in paragraph 26 of the Statement of Claim and says further that the Securities remain suspended as at the date of filing this pleading because: (a) on 24 September 2019, the [NSX] determined that [Bridgeman] should be suspended until such time as two conditions for reinstatement were complied with, and [Bridgeman] has as at the date of filing not met these requirements; (b) on 1 October 2019, the [NSX] again suspended the Securities owing to [Bridgeman's] failure to lodge its Audited Annual Financial Statements in compliance with Listing Rule 6.9 and as at the date of filing this pleading, [Bridgeman] has not filed its Audited Annual Financial Statements. (together, the Subsequent Suspension Decisions) (Emphasis in original) 11 This application was made orally at a case management hearing held on 7 May 2020. As ordered, Bridgeman subsequently filed a set of submissions in support of that application. The NSX did not file its own set of submissions in response to the same order, but rather endorsed the submissions filed by Bridgeman. I will therefore treat Bridgeman's submissions as the joint submissions of the parties. In those submissions, the parties identified three issues upon which they claimed the question of liability turned, as follows: (a) First, the legal effect of the Listing Rules and the obligations imposed on the [NSX] by the Listing Rules. There is a dispute between the parties as to the legal effect of the Listing Rules and whether, and to what extent, they operate as a contract between the parties. Those are questions of law. (b) Second, whether the decision by the [NSX] to suspend [Bridgeman's] shares on the Exchange (the Suspension Decision) was made. There is no dispute between the parties in relation to the fact that the Suspension Decision was made and when the Suspension Decision was made. (c) Third, whether the Suspension Decision was - on [Bridgeman's] contended construction of the Listing Rules - fair and reasonable (and not made for an arbitrary, extraneous or capricious reason). That will require the Court to undertake an examination of the [NSX's] conduct in arriving at the Suspension Decision. Related to this issue is whether the [NSX] promptly informed [Bridgeman] of its reasons for the Suspension Decision. (Emphasis in original; footnotes omitted) 12 They contended that the Court would only be required to make any factual findings on the third issue above. Accordingly, they contended that the separate determination of these liability issues: … will contribute to the saving of time and cost and could lead to the disposal of the action or contribute to its settlement. If the Court determines the question of liability in favour of the [NSX], the action will be disposed of as questions of quantum will not arise. That will obviate the need for extensive expert evidence and discovery. Similarly, if the question of liability is determined in favour of [Bridgeman], that may contribute to the settlement of the proceeding thereby also obviating the need for a further hearing. 13 They identified three disciplines which were likely to be involved in providing the "extensive" expert evidence referred to above as: (a) an expert financier as to the increased costs of borrowed funds and the availability of finance to [Bridgeman] as a consequence of the Suspension Decision; (b) an expert forensic accountant as to: (i) the diminution in the value of [Bridgeman's] business as a consequence of the Suspension Decision; (ii) the increase in the value of [Bridgeman's] shares in HML as a consequence of savings made by HML once controlled by [Bridgeman]; and (c) an expert investment banker as to whether [Bridgeman] would have acquired more than 50 percent of the shares in HML but for the Suspension Decision. (Footnotes omitted) They also emphasised that it would be necessary to gather "significant documentary evidence" to provide to these expect witnesses and that would, in turn, be likely to require orders for discovery. 14 Nonetheless, the parties acknowledged that there were two factors that might stand against the issues of liability in this proceeding being determined separately. They were: any findings of credit that may affect both the issues of liability and quantum; and any overlap between the factual matters affecting both sets of issues. In respect of the former factor, they contended that Mr Fitzpatrick, the person at the NSX who made the Suspension Decision on its behalf, would give evidence on the issues of liability, but was unlikely to give evidence on the issues of quantum. Accordingly, they contended that any credit findings made in respect of Mr Fitzpatrick on the issues of liability would not be relevant to any subsequent hearing on the issues of quantum. Conversely, they claimed that Mr McAuliffe, the main witness for Bridgeman, while likely to give evidence on both the liability and quantum issues, was unlikely to be subject to any credit findings in relation to the issues of liability because his involvement on those issues was limited to two telephone conversations that occurred on 10 April 2019 and 22 May 2019. On the latter factor, they contended that there was no significant overlap between the contested factual issues on liability and quantum. 15 The principles bearing on an application of this kind were recently summarised by the Full Court in Roberts on behalf of the Widjabul Wia-Bal People v Attorney-General of New South Wales [2020] FCAFC 103 (Roberts) at [40]-[43]. It is unnecessary to rehearse that summary in these reasons. 16 Clearly the joint submissions of the parties above must be given weight in determining this application. Among other things, they reveal that there is a possibility that costs and delay will be avoided in this proceeding by having separate trials on the issues of liability and quantum. However, I am not satisfied that outcome is sufficiently clear that the caution the authorities urge before embarking on that course should be set aside or, to put it differently, that the "utility, economy and fairness to the parties [of this course] are beyond question" (see Roberts at [40(38)]). My reasons for this scepticism are as follows. 17 First, I consider there is a higher degree of risk than that acknowledged by the parties of there being an overlap between the contested facts bearing on the issues of liability and quantum in this proceeding. One example of this overlap is the circumstance of the Suspension Decision pleaded at [19(a)] of Bridgeman's statement of claim (admitted in the NSX's defence) relating to "alleged concerns with [Bridgeman] regarding disclosure, governance, related party transactions, conflicts of interest, insolvency and related party loans". At least on a prima facie basis, those allegations would appear to have a direct bearing on the heads of damage claimed by Bridgeman at [27] and following of its statement of claim, particularly the second head of damage: (b) "Loss of value of investment management business". The chances of this overlap occurring would appear to be compounded by the allegations in the NSX's defence at [26] regarding the subsequent Suspension Decisions (see at [10] above). 18 Secondly, I consider it is naïve, with respect, to expect that any adverse findings of credit made against Mr Fitzpatrick and/or Mr McAuliffe will be quarantined to the liability or quantum issues, as the case may be, as has been contended by the parties. 19 Thirdly, I do not accept that the settlement of this proceeding is likely to be facilitated by conducting separate trials on liability and quantum. The primary purpose of Bridgeman's proceeding is to obtain an award for the loss and damage it claims to have suffered. Experience shows that the provable quantum of such an award and the unrecoverable costs associated with achieving it, are two of the main factors affecting settlement. Accordingly, I do not accept that focusing on the issues of liability and leaving the issues concerning quantum until later is likely to facilitate settlement in this proceeding. 20 Fourthly and finally, given the nature of the allegations made in the pleadings as reviewed above, I consider there is an appreciable risk that any judgment on liability is likely to be appealed by the unsuccessful party. That is likely, in turn, to lead to the fragmentation of this proceeding and to cause delay in its ultimate finalisation. 21 For these reasons, I do not consider it is appropriate to accede to the joint submissions of the parties and conduct separate trials on the issues of liability and quantum in this proceeding. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.