Class action against ASIC dismissed and leave to replead refused
09 October 2024
09 October 2024
The Supreme Court of Queensland has dismissed Blue Dog Group Pty Ltd's class action against ASIC, finding the pleading lacked any proper basis and raised no issues that needed to be investigated at trial.
Blue Dog was a major shareholder in Blue Sky Alternative Investments Limited, which was listed on the ASX. In March 2018, Glaucus Research Group published a report which was critical of Blue Sky, following which its share price fell significantly. Blue Sky was eventually suspended from listing and receivers were appointed.
In March 2024, Blue Dog commenced a shareholders' class action against ASIC and 12 other defendants (including the authors of the Glaucus report) on behalf of all persons who held an interest in Blue Sky shares at the time Glaucus published its report.
In particular, Blue Dog alleged that the Glaucus report was false or misleading and induced people to deal in the shares of BLA, contrary to sections 1041E and 1041F of the Corporations Act.
The claim against ASIC was essentially that it did not take regulatory action in respect of the Glaucus report and the short selling because it was acting in concert with the other defendants to harm Blue Sky. This gave rise to two causes of action:
Both claims were accompanied by allegations that ASIC had acted in bad faith.
Blue Dog then proceeded to file three further versions of the statement of claim, expanding its case on each occasion, largely in response to complaints by the defendants that the statements of claim did not disclose a viable cause of action.
ASIC applied to strike out Blue Dog's statement of claim, and also submitted that the Court should decline leave to replead the case.
Immediately after the hearing, Blue Dog admitted that its pleadings were hopeless and consented to an order striking out its claim, but applied for leave to replead on the basis that it had briefed senior counsel to ensure that the case be brought on a proper footing. ASIC pressed for a determination of its contention that leave should not be granted to Blue Dog to replead its case against ASIC as that issue had been heard and should be determined.
Justice Bradley held that claims for damages under section 1041I cannot be made against ASIC – and so those claims must inevitably fail.
That is because:
His Honour also held that this is not affected by whether or not ASIC acted in good faith - although even if it was Blue Dog was unable to plead a case that ASIC failed to act in good faith.
His Honour noted that section 246 of the Australian Securities and Investments Commission Act 2001 (Cth) immunised ASIC from any claim for damages for any act done or omitted to be done in good faith in the performance of its function as the corporate regulator. His Honour also noted that Blue Dog alleged that ASIC had acted in bad faith.
Justice Bradley remarked that this was a serious allegation and ought not to have been pleaded unless Blue Dog and its lawyers were satisfied that evidence existed to prove the allegation at trial. His Honour considered none of the pleaded facts supported any conclusion or inference that ASIC had acted in bad faith. As this was Blue Dog's fourth attempt to plead its case, that suggested that it simply did not have the evidence to do so.
His Honour considered that given Blue Dog could not plead bad faith, it had no real prospect of succeeding in any claim for damages against ASIC.
His Honour concluded that Blue Dog should not get leave to plead the case afresh because there was no reason to believe that "Blue Dog could plead its claim in a way that could survive another application by ASIC to strike it out". In his Honour's view, the pleadings were "scandalous and embarrassing" and "ASIC should not be required to respond to untenable allegations that could not possibly succeed". His Honour therefore dismissed the claim in its entirety.
*Ashurst acted for ASIC in the case.
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