Issue
The corporate legal issue faced by BHP Billiton Limited was the non fulfillment of disclosure requirement as per the ASX Listing Rules and also not taking adequate action to prevent the 2015 Fundao Tailings dam collapse. Consequently, BHP Billiton Limited is facing a class-action suit from its investors for not attributing priority to safety despite assurances and not disclosing adequate information to the investors regarding the disaster and the measures taken by the Company. The Class action suit is being instituted on the ground that the continuous disclosure requirement in terms of ASX Listing Rules has been violated by BHP Billiton Limited and the Company has engaged in misleading and deceptive activities as a consequence thereof.
Rule
In terms of Rule 3 of the ASX Listing Rules, the Companies Listed in the Australian Stock Exchange are required to continuously disclose information which may have material impact on the prices or value of the securities of the organisation. In terms of safety and security, the environmental laws in Brazil requires preventive measures be engaged for mining activities. BHP Billiton Limited along with its co-venturer Vale SA, Brazil had not enough to ensure safety and security as per the Brazilian environment laws as consequence of which the Fundao Tailings dam had collapsed resulting in huge environmental disaster. In view of this Rule 3 of the ASX Listing Rules requires continuous disclosure of the material information which BHP Billiton did not disclose and as a result of the same, the investors allege deceptive practice by BHP Billiton and in accordance to Section 33C of Federal Court of Australia Act, 1976, a class action suit is prepared to be filed by Phi Finney McDonald. In terms of Section 33C, the claim of the investor is giving rise to similar circumstances, substantial common issue and the claim is prepared to be filed by sever or more person against BHP Billiton Limited.
Application
In terms of ASX listing Rules, BHP Billiton Limited was required to disclose the information pertaining to the collapse of the Fundao Tailings Dam and the consequential loss to life and property. Moreover, in terms of ASX Listing Rules, the BHP Billiton was required to disclose the material aspect and consequential impact of the disaster. BHP Billiton Limited and its joint venture in Brazil Vale SA, which operates the Germano iron mine in Minas Gerals, failed to take preventive measures which could have prevented the disaster and saved many lives and property. It has been alleged that Brazilian environment laws has also been violated by BHP Billiton Limited and adequate disclosure of the same has not been made to the investors which was considered to be deceptive in nature.The Class action suit in term of Section 33C of Federal Court of Australia Act, 1976 to seek remedy from the court of law and protect the interest of the investors of BHP Billiton Limited against the deceptive practices engaged by the organisation. The class action suit has been filed considering the non disclosure of material information which has resulted in substantial fall in the share prices of BHP Billiton Limited in the ASX listing bourse.
Conclusion
Therefore, considering the consequence of continuous disclosure requirement in terms of Rule 3 of the Listing Rule and Section 33C of Federal Court of Australia Act, 1976, a class action suit would be filed against BHP Billiton for safeguarding the investors interest.
What avenues may be open to law enforcement authorities, directors and affected parties confronted by these issues?
Issue
The issue pertains to the class action suit prepared to be instituted due to the violation of continuous disclosure requirement by BHP Billiton and engaging in deceptive practices that caused loss to the investor. The issue also relates to violation of environmental laws in Brazil causing loss of life and property in Brazil. The law enforcement authorities are facing the issue to prosecute the persons behind the disaster and make the management of BHP Billiton responsible for non disclosure to the ASX causing loss to the investors. The issue faced by the Directors relates to defending the class action suit and compensate for the loss caused due to the environmental disaster. Finally, the parties confronted by the issues, such as the investors of BHP Billiton Limited, desires to file class action suit to avail damages to the loss occurred to them due to the non disclosure and deceptive practices of BHP Billiton.
Rule
The class action suit will be filed in terms of Section 33C of Federal Court of Australia Act, 1976 which requires that the commencement of the class action suit should depend on:-
- Claims by 7 or more than 7 persons against the same person
- The claim must arise out of related, similar or same situation
- The claims raised by the persons must develop an important common legal issue or fact
The class action prepared to be filed on the ground of non fulfilment of continuous disclosure and deceptive practices by the organisation would need to be adhere to the provisions of Section 33 of Federal Court of Australia Act, 1976 and the Rule 3 of the ASX Listing Rules were also required to be proved to be violated.
Application
Considering the provisions of Federal Court of Australia Act, 1976 and Rule 3 of the ASX Listing Rules, the avenues to the Directors include a settlement with the claimant of the class action suit, legally defend the class action suit and seek remedy of the Court in terms of Section 33W or Section 33V of Federal Court of Australia Act, 1976 to settle claim or discontinue class-action suit. The law enforcement may take suo moto conginzance of the matter and can take action in a Court of law however, the same would require investigation and concrete evidence in the Australian jurisdiction. Finally, the claimant under the class action suit can invoke Section 33 of the Federal Court of Australia Act, 1976 and prove the violation of Rule 3 of the ASX Listing Rules to avail settlement from the Court and damages from BHP Billiton.
Conclusion
Therefore, the directors, law enforcement authorities and the parties confronting the issues have various avenues considering the provisions of Federal Court of Australia Act, 1976 and the Rule 3 of the ASX Listing Rules to avail remedy.
Briefly outline any earlier major decided cases where similar issues have arisen, might those cases be significant?
Issue
Similar issue have arisen in terms of class action instituted on behalf of the shareholders of the organisation for violation of continuous disclosure requirement in Camping Warehouse Australia Pty Ltd v Downer EDI Ltd [2016]. In the present case, the shareholders of Downer EDI Ltd had filed class action suit against Downer for the violation of statutory continuous disclosure obligation regarding the Waratah train project carried on by one of the subsidiaries of Downer EDI Ltd. In this case, it was alleged that Downer failed to properly inform in the timely manner to the ASX regarding the Waratah train project carried on by one of the subsidiaries and its announcement to raise $190 million against the Rolling Stock Manufacture contract as one of the part of Waratah train project caused sharp fall in the prices of Downer.
Rule
In terms of Rule 3 of the ASX Listing Rules, proper disclosure pertaining to material information that could affect the prices of the securities is required. Downer EDI failed to fully comply with Rule 3 of ASX listing rules and the did not properly disclose material information relating to Waratah project and raising of funds which caused loss to the investors by way of decline to the price of shares. Hence, in terms of Section 33 of Federal Court of Australia Act, 1976, class suit was instituted for claiming damages against the loss caused to the shareholders and also against the deceptive practices of Downer EDI Ltd.
Application
Camping Warehouse Australia Pty Ltd. And other members affected by the conduct of Downer EDI Ltd. And acquired shares on or after 12th Jan 2010 and suffered losses till 31 May 2010 filed the class action suit against Downer EDI Ltd. In terms of Section 33 of the Federal Court of Australia Act, 1976, the Court assessed the merits and the substantial cause arising out of the claim. The court observed that the number of members in the class, the matter relating the class suit and the substantial matter of law or fact arising out of the claim. During the trial, various members opted out of the class and they were not eligible for the claims raised in the class action suit. The representations made by both the parties and Downer provided the disclosures made to the bourses and also the circumstances of the disclosure. Camping however claimed the insufficiency in the disclosure and the losses caused to the shareholders due to the inadequate disclosure. During the continuance of the trial, both the parties arrived at the settlement against the claim raised in the class action suit.
Conclusion
The class-action suit was settled by the Court on 5th February 2016 during the continuance of the trial for $11.1 million which included legal fees and funder’s fees against the claim of $15 million raised by the claimant. The potential class members submitting adequate proof were around 10,700. Therefore, in class-action suit, the settlement with the parties before or during the continuance of the trial is quite common in most of cases.
