The lead applicant in a class action against Murray Goulburn has lost a bid to look at documents showing the dairy cooperative’s trust consulted with a QC about possible negligence claims against Herbert Smith Freehills.
The Federal Court on Friday dismissed an interlocutory application by the class representative that sought documents showing that the Murray Goulburn Unit Trust retained John Karkar QC and barrister Kane Loxley “to advise in relation to claims which [MG Unit Trust] might have against Herbert Smith Freehills”.
The applications also sought correspondence between Freehills and MG Responsible Entity (MGRE), a wholly-owned subsidiary of the Murray Goulburn Cooperative. The documents detailed legal work done in relation to setting up the MG Unit Trust.
The class action was filed against the cooperative, the trust and individual directors in May 2017 on behalf of investors who bought units in the milk processor’s trust, alleging the trustee breached disclosure requirements relating to financial forecasts for 2015 and 2016.
In rejecting the application for access to the Freehills documents, Justice Jonathan Beach said the lead applicant had not established any special circumstances that allowed him to pursue legal action that MGRE itself had failed to take against its law firm.
“The apparent strategy of the plaintiff is to obtain inspection of documents to assist him in determining whether MGRE (as trustee) has a claim against HSF which MGRE ought to pursue but is not pursuing, thereby giving the plaintiff as beneficiary the right as he asserts to bring such an action against HSF,” Judge Beach said in a judgment released Friday.
“The plaintiff does not have any legitimate let alone sufficient interest in obtaining the documents sought.”
The material was likely protected by legal professional privilege and, if provided solely to the lead applicant, would prejudice other unit holders, Judge Beach said.
The judge ordered the applicant to pay MGRE’s legal costs in fighting the request, including additional fees it incurred in retaining K&L Gates, which it did in the event Freehills was added as a respondent in the proceedings.
“MGRE has been forced to incur significant costs in responding to the application, including briefing separate solicitors in the face of the threat by the plaintiff to disrupt its conduct of the application by contending that HSF was in a position of conflict on the application,” he said.
The class action alleges that several announcements by the Murray Goulburn trust in the first half of 2016 relating to tumbling milk prices sent the price of units into sharp decline.
On May 2, 2016, the trust told the Australian Stock Exchange that the cooperative would introduce a “Milk Supply Support Package” that would provide a loan funded by borrowing between $95 million and $165 million. The same day, the price of units dropped from $1.035 to $0.89.
The class action alleges the Murray Goulburn trust misled investors and breached its fiduciary duties and continuous disclosure obligations.
The lawsuit was initially filed in the Victorian Supreme Court but was transferred to Federal Court after the Australian Competition and Consumer Commission launched separate proceedings against Murray Goulburn and former executives.
Murray Goulburn faces claims by the ACCC over its representations to dairy farmers between June 2015 and April 2016. The consumer regulator claims the milk processor misled Southern Milk Region dairy farmers about the average farmgate milk price it expected to pay them during the 2016 financial year.
The ACCC has also flagged issues with Murray Goulburn’s proposed sale to Canada’s dairy giant Saputo.
A case management hearing in the class action is scheduled for September 21.
Herbert Smith Freehills is representing 12 of the 13 respondents. Corrs Chambers Westgarth represents one respondent.
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