By Katherine Czoch, Kaveetha Kumar and Michelle Zhou
|
Published 28 September 2026
This year has marked a turning point for securities class actions in Australia, with three decisions reshaping the landscape for ASX-listed companies and their insurers, carrying major implications for the global D&O market. In Southernwood v Brambles Limited, a shareholder class action succeeded at trial for the first time. Meanwhile, the appellate endorsement of market-based causation in Crowley v Worley Limited has lowered the evidentiary bar for plaintiffs seeking to establish loss. Most recently, the plaintiffs in the shareholder class action in Parkin v Boral Limited succeeded on liability.
However, the landscape remains in flux, with both Brambles and Crowley now on appeal, and the High Court poised to deliver its decision in the appeal and cross-appeal in Zonia Holdings Pty Ltd v Commonwealth Bank of Australia [2025] FCAFC 63, following the hearing of those applications in June 2026.
Australia’s continuous disclosure regime
Section 674(2) of the Corporations Act 2001 (Cth) and ASX Listing Rule 3.1 require ASX-listed entities to immediately disclose material price-sensitive information. A failure to do so may expose them to shareholder claims.
Southernwood v Brambles Limited (No 3) [2026] FCA 418
Justice Murphy held that Brambles breached its continuous disclosure obligations by failing to disclose that it lacked reasonable grounds to maintain its FY17 earnings guidance. His Honour rejected Brambles' reliance on qualifying statements, characterising them as 'standard-form and generic' and 'boilerplate'.
The Court endorsed market-based causation and applied the facilitation principle to establish and quantify loss in the face of contested expert evidence. The facilitation principle operates by drawing assumptions in the plaintiff's favour where the defendant's wrongdoing renders quantification difficult. In Brambles, it was used to resolve uncertainties favouring the plaintiffs, including by making assumptions about counterfactual share prices where precise calculation was inherently complicated by the defendant's non-disclosure. This represented an expansive application of the principle, deploying it to bridge gaps in the plaintiff's expert evidence.
Notably, the facilitation principle in Brambles was applied in circumstances where there was clear corrective disclosure and reliable expert event study evidence capable of supporting a loss assessment. This stood in contrast to Zonia, where the plaintiffs' event study report was founded on an erroneous assumption of economic equivalence. Justice Murphy considered that the difficulty lay in apportioning loss attributable to the non-disclosure. On that basis, the application of the facilitation principle in Brambles may be distinguishable in cases involving speculative loss exposure or more complex counterfactual scenarios.
Brambles is subject to an appeal to the Full Federal Court.
Crowley v Worley Limited [2026] FCAFC 78
Crowley concerned misleading earnings guidance by Worley Limited in August 2013. The Full Court endorsed market-based causation as ‘fundamental orthodoxy’, holding that in a semi-strong and informationally efficient market the price of shares reflects all publicly available information and serves as a proxy for true market, without requiring expert evidence. It was held that price distortion from non-disclosure was properly attributable to the company’s breach, regardless of whether individual investors were aware of the undisclosed information or may not have considered it material to their decision.
The Full Court confirmed that shareholders need not prove individual reliance, and that corrective disclosure causing a share price decline may serve as important evidence of causation.
The Full Court also endorsed the facilitation principle, stating that where the defendant’s conduct makes quantification difficult, the principle gives the plaintiff a fair wind, not a free ride, by drawing reasonable inferences in the plaintiff’s favour when assessing loss. The applicants in Crowley put forward a proportional apportionment methodology which was not disputed and this gave the Full Court a sufficient evidentiary platform to estimate loss under the facilitation principle.
On 25 June 2026, Worley Limited applied for special leave to appeal to the High Court.
Parkin v Boral Limited (Initial Trial Judgment No 1) [2026] FCA 1135
On 13 August 2026, Justice Lee found against Boral on liability, and deferred determination on causation and loss pending the High Court’s decision in Zonia. The case concerned financial irregularities that were not disclosed to the market until December 2019 and resulted in pre-tax earnings being overstated by approximately USD 24.4 million.
On constructive awareness, the Court drew a critical distinction between impermissibly supposing an officer should have investigated and attributed unknown facts that investigation might have uncovered, versus the permissible approach of asking what an officer ought reasonably to have known through the proper performance of existing duties. The Court rejected arguments that earlier red flags should have triggered disclosure, finding that, viewed contemporaneously rather than with hindsight, those matters were capable of being understood as isolated or remediable. The Court did not point to any specific lay or expert evidence on which the finding of constructive awareness was based.
As to materiality, the Court commented that an objective commercial commonsense test must be applied on whether a reasonable person would expect the information to influence investors’ decisions.
Awaiting the High Court’s determination in Zonia
We expect the Court to address materiality, causation as well as the approach to event studies, confounding information and quantification methodology.
The central issues on appeal include:
- Whether causation can be established through findings of materiality and evidence of a share price decline, without proving economic equivalence between the actual corrective disclosure and the counterfactual disclosure
- Whether the facilitation principle permits a Court to assess loss on the best available evidence where the defendant’s conduct has made precise quantification difficult
Implications
Subject to the outcome of the appeals, these cases suggest that Australian securities class actions have entered a new phase. Although significant evidentiary hurdles remain for plaintiffs, the recent decisions indicate the following key shifts:
- Constructive knowledge through ordinary processes. Courts have signalled that constructive knowledge may arise through routine reporting and consolidation processes, rather than requiring proof that officers had actual awareness of the relevant information.
- Lower barriers to causation and loss once liability is established. Once liability is found, the thresholds for proving causation and loss appear to be lower, with potentially limited expert evidence required. Precise loss quantification may not be necessary where the defendant's own conduct has made exact measurement difficult.
- Endorsement of market-based causation. The adoption of market-based causation removes the need for plaintiffs to demonstrate individual reliance on, or a specific reaction to, hypothetical corrective disclosure.
It will be interesting whether these shifts remain in situ once the appeal decisions are delivered but, for the moment, these developments carry significant implications for ASX-listed companies and D&O insurers. The number of securities class actions commenced may increase, the risk of claims succeeding is heightened, and exposures on these claims could be materially larger.
For D&O insurers, pricing and underwriting must be reassessed considering these judicial developments. Insurers should review policy definitions of ‘Loss’, ‘Securities Claim’ and ‘Wrongful Act’ to ensure clarity given the evolving judicial interpretation of constructive awareness and market-based causation. Further, the facilitation principle’s ‘fair wind’ approach to loss quantification introduces uncertainty in reserving, as courts may award damages based on reasonable inferences rather than precise actuarial calculations.
Authors
