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Federal Court of Australia Orders Respondent in Shareholder Class Action to Hand Over Insurance Information

Federal Court of Australia Orders Respondent in Shareholder Class Action to Hand Over Insurance Information

The following piece was contributed by Anne Freeman of Australian law firm, Piper Alderman.

Virgin Australia, which has been sued by investors who purchased unsecured notes in the airline based on statements in a 2019 prospectus for a capital raising, has been ordered to advise the lead applicant in the class action whether its has made a claim against its insurer for its costs and any liability in the class action, and whether its insurer has agreed to grant indemnity.  It has also been ordered to produce copies of any insurance policies which might respond to the claims made in the class action[i]. The orders made are in contrast to a 2020 decision of the Court[ii], which found that the case management powers of the Court did not empower it to order the disclosure of the respondent’s insurance policies in class actions.  In that case, very similar orders were sought, namely for production of policies and for communications regarding the insurer’s position on the grant of indemnity.  The applicant in that case relied upon a 2019 Federal Court authority, Simpson v Thorn Australia Pty Ltd trading as Radio Rentals[iii] , which had resulted in orders for the production of insurance information, to argue that the documents were relevant to inform the applicant whether further prosecution of the proceedings was commercially viable and whether mediation was appropriate and, if so, what the appropriate quantum of settlement might be.  The applicant also argued that the documents were relevant to the approval of the settlement and to determine whether action against the insurer may be needed to obtain a declaration of indemnity.  The judge disagreed, taking the conventional position that insurance information is not relevant to the proof of a cause of action in the proceedings and is therefore not discoverable, and noting that the case management powers of the Court were not designed to “confer an asymmetric commercial advantage in favour of one party at the expense of another” in mediations.  Beach J also rejected the suggestion that the documents were needed for any settlement approval, and distinguished the position in Simpson where leave had been granted to bring a claim against the insurer. The orders are also in contrast to a decision of another Federal Court judge, who declined an application by a shareholder to access insurance policies under a discretionary power which may allow shareholders access to the books and records of the company, if the application is made in good faith and for a proper purpose[iv].  That decision was based upon a finding by the judge that the claims made by the class members did not arise from their rights and entitlements as shareholders but rather as potential investors, and that therefore the application was not brought for a proper purpose. The orders in Virgin Australia were made in the context of a Deed of Company Arrangement and the need to consider which claims against the company were covered by insurance.  That made the insurance position relevant, and distinguishes it from the decision in Evans.  However, the decision does show that accessing insurance information is a matter to be considered carefully in the circumstances of the individual case.  There are mechanisms available to obtain insurance information, which is obviously valuable in considering the recoverability of any funded claim.  Early consideration should be given in each class action as to potential means to obtain this information. [i] Matheson Property Group Australia Pty Ltd as Trustee for The MPG Trust v Virgin Australia Holdings Limited NSD346/2022, order of Lee J, 28 June 2022 [ii] Evans v Davantage [2020] FCA 473 [iii] [2019] FCA 1229 [iv] Ingram as trustee for the Ingram Superannuation Fund v Ardent Leisure Limited [2020] FCA 1302  
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Locke Capital Backs Sarama in US $120 Million ICSID Claim Against Burkina Faso

By John Freund |

A junior gold explorer is turning to third-party capital to fight what it calls the expropriation of a multi-million-ounce deposit.

According to a press release on ACCESS Newswire, ASX- and TSX-listed Sarama Resources has drawn down a four-year, US $4.4 million non-recourse facility from specialist funder Locke Capital II LLC. The proceeds will pay Boies Schiller Flexner’s fees and expert costs in Sarama’s arbitration against Burkina Faso at the International Centre for Settlement of Investment Disputes (ICSID).

Sarama alleges the government retroactively revoked its Tankoro 2 exploration permit in 2023, halting development of the flagship Sanutura project. An arbitral tribunal chaired by Prof. Albert Jan van den Berg held its first procedural hearing on 25 July; Sarama’s memorial is due 31 October, and the company is seeking no less than US $120 million in damages.

Under the Litigation Funding Agreement, Locke’s recourse is limited to arbitration proceeds and the ownership chain of Sanutura; Sarama’s other assets remain ring-fenced. Repayment occurs only on a successful award or settlement, with Locke’s return calculated on a multiple-of-invested-capital basis and adjusted for timing.

The deal underscores the continued appetite of specialist funders for investor-state claims, particularly in the mining sector where treaty protections offer a clear legal framework and potential nine-figure payouts.

Pogust Goodhead Targets BHP in £1.3B Conspiracy

International plaintiffs’ firm Pogust Goodhead has opened a fresh front in the marathon litigation over the 2015 Fundão dam collapse, dispatching a pre-action letter that accuses BHP, Vale and their joint-venture Samarco of orchestrating an unlawful plot to sabotage the English proceedings.

Acting through U.S. counsel Orrick, the firm says the miners induced claimants to sign cut-price settlements in Brazil, interfered with existing retainers and weaponised redress programmes run by the Renova Foundation to starve the London group action of participants. Pogust Goodhead pegs its damages at more than £1.3 billion—roughly the fees and uplifts it stands to lose if the 620,000-strong claimant cohort is picked off piecemeal.

An article in Reuters says the firm will argue three causes of action—unlawful means conspiracy, inducement of breach of contract and enforcement of its equitable lien—and blames the defendants’ constitutional challenge in Brazil (ADPF 1178) and the proposed “Repactuação” mega-settlement for the intensified pressure campaign.

The pre-action salvo lands just months after the close of a 13-week liability trial against BHP in London; judgment is due later this year, with a quantum phase already on the docket for 2026. Separately, Vale and BHP confront contempt allegations for allegedly funding satellite litigation to derail municipal claims. Should the new claim proceed, the miners could face parallel exposure not only for compensatory payouts—estimated at up to £36 billion—but also for the law firm’s lost fees and financing costs, which Pogust Goodhead says now exceed $1 billion.

Court Shields Haptic’s Litigation-Funding Files From Apple

By John Freund |

A Northern District of California decision has handed patent plaintiff Haptic Inc. an important procedural win in its infringement fight with Apple over the iPhone’s “Back Tap” feature.

An article in eDiscovery Today by Doug Austin details Judge Jacqueline Corley’s ruling that work-product protection extends to Haptic’s damages analyses and related documents that were shared with a third-party litigation funder during due diligence.

Although Apple argued that those materials might reveal funder influence over strategy or settlement posture, the court held that Apple showed no “substantial need” sufficient to overcome the privilege. The opinion also rejects Apple’s broader bid for a blanket production of Haptic-funder communications, finding the parties had executed robust NDA and common-interest agreements that preserved confidentiality and avoided waiver. Only royalty-base spreadsheets directly relevant to Georgia-Pacific damages factors must be produced, but even those remain shielded from broader disclosure.

Judge Corley’s order is the latest in a string of decisions limiting discovery into financing arrangements unless a defendant can identify concrete, case-specific prejudice. For funders, the ruling underscores the importance of tight contractual language—and disciplined information flows—in preserving privilege. For corporate defendants, it signals that speculative concerns about control or conflicts will not, standing alone, open the door to funder dossiers.