Class Actions Update: Turning tides – recent success for claimants demonstrates ongoing shareholder class action risk

What you need to know

• Until recently, there had been a string of unsuccessful shareholder class actions in Australia, with shareholders failing to recover loss following a judgment despite some successes on questions of liability.
• That has raised significant questions about how causation, loss and damage can be established, with an application currently before the High Court to resolve some of these complex issues
• But two more recent successes this year by claimants in Southernwood v Brambles Limited (No 3) [2026] FCA 418 and Crowley v Worley Limited [2026] FCAFC 78 demonstrate that applicants can succeed on causation and loss.
• In the more recent Crowley case, the Full Court has endorsed a more permissive approach to assessing loss through adoption of the "facilitation principle" – although these issues will be considered by the High Court in another case, which is being heard in mid-June 2026. We provide our insights on the recent Brambles case here.

What is the case about?

The claim is a conventional shareholder class action. It is alleged that Worley breached its continuous disclosure obligations and engaged in misleading or deceptive conduct when it released its FY14 earnings guidance. Worley downgraded that forecast three months later and its share price dropped 26%.

The litigation has significantly contributed to the body of jurisprudence in this area. The case has a long procedural history. It was dismissed at first instance. That decision was overturned on appeal and remitted by the Full Federal Court to a single judge for determination. On remittance, the judge made a finding of contravention (but no loss). The applicant also appealed against that decision to the Full Federal Court.

When does a company have knowledge of information for the purposes of continuous disclosure obligations?

One of the elements of a disclosure obligation is that the company is aware of information. In a nutshell, a company is 'aware' of information (which can include opinions) if the board, or other directing minds of the company, have facts before it and should have formed an opinion from those facts.

An issue on appeal was how a court should resolve differing opinions between the decision-making people within a company for the purposes of attribution of knowledge.

The Full Court held that attributing knowledge is not a question of ranking and reconciling conflicting knowledge of a company's directors and officers. Rather, the knowledge of each is attributed to the company. The Full Court said that:

"it is sufficient to establish lack of reasonable grounds if at least one of those persons knew of facts and circumstances which were inconsistent with the reasonableness of the representation, even if another person was not aware of those same facts and circumstances".

The Full Court said that to accept otherwise would neutralise the operation of the statutory provisions (the purpose of which is to ensure that the trading of securities occurs on the basis of all material information of which the company is aware).

Confirmation of market-based causation

Turning to issues of causation, the decision confirms (at least at the intermediate appeal court level) the availability of market-based (indirect) causation as a valid means of proving causation in Australia. Recently, in Brambles, Murphy J similarly found both liability and loss on the basis of market-based causation (which we discuss in more detail here).

Market-based causation is where a shareholder does not need to individually show that they directly relied on the non-disclosure or misleading conduct to establish loss. The Full Court agreed with the seminal decision on this issue in TPT Patrol Pty Ltd as trustee for Amies Superannuation Fund v Myer Holdings Limited [2019] FCA 1747.

Indirect causation is premised on the basis that:

• most market participants trade on the basis of an assumption that all material information has been disclosed to the market; and
• the market price of a security is an acceptable proxy for its true value (if the market in which it is trading is semi-strong and informationally efficient).

However, the Full Court held that there is no assumption that a market is informationally efficient - if an applicant wishes to rely on the fact that a market has certain qualities, then they are required to prove it.

Some loss and damage on findings of contravention?

On remittance, the Court found that Worley had engaged in misleading conduct and made representations without a reasonable basis. The question on appeal was whether the judge erred in failing to find that those contraventions caused "some loss or damage". This is similar to an issue that is currently before the High Court in the Zonia Holdings litigation.

Applicants in shareholder claims have faced ongoing challenges when seeking to prove loss by expert evidence containing event studies based on counterfactual scenarios. The difficulty has been that the counterfactual scenarios have not matched the facts ultimately found by the court. In Crowley, the Full Court did not consider the applicant had confined his case to proving the existence of causally connected loss, as well as the quantum of that loss, by reference to the specific counterfactuals in an event study.

Further, the Full Court said that the analysis should commence with the fact that the relevant contraventions had been established. The remittance judge erred by "framing the issue in terms of the impact of a hypothetical counterfactual disclosure, rather than the impact of the contravention that had been established".

The court was critical of an inquiry to establish loss being one that is concerned only with how the market would have reacted if a company had complied with its obligations in some particular hypothetical way. Not only would that put the applicant to an unwarranted additional burden, but it would also deprive the applicant of the benefit of the inferences that naturally arise from the contraventions (in this case, a material misstatement of a company's guidance in relation to future earnings).

In Crowley, the Full Court considered:

The subject matter of the information (i.e. earnings guidance) was squarely relevant to the market's assessment of the value of Worley's shares.

It was not necessary to have regard to a specific or precise counterfactual disclosure. The evidence in the case supported an inference that the price of Worley's shares was higher by reason of the contraventions "without needing to identify and isolate the precise contours of what a world without the contraventions in question would have looked like".

There was an "irresistible" inference arising from the evidence as a whole that those contraventions would have caused the price of WOR’s shares to be inflated to some extent.

Quantification of loss

An issue before the High Court in a separate class action is whether to award any loss where it is not possible to isolate the effect of the contravention from other information that was released to the market – and the application of the facilitation principle in assessing damages.

That principle allows the courts to do the best they can to not allow difficulty of estimation to deprive a claimant of a remedy, particularly where that difficulty is itself the result of a defendant's wrongdoing.

The facilitation principle was enlivened in Crowley. The Full Court considered that:

"the difficulty, if not impossibility, of proving what the reaction of the market would have been to a hypothetical disclosure, was caused by [Worley's] contraventions. Put another way, that difficulty is inherent in the task required to be undertaken as a result of [Worley's] contraventions".

Whether and how the facilitation principle will be utilised will depend on the extent to which an applicant attempts to grapple with the particular problem presented by the facts of the case. In Crowley, the applicant advanced expert evidence that attempted to deal with a situation where the Court found the relevant counterfactual disclosure to be higher than the revised earnings guidance announcement (i.e. a quantitative difference). The Court was able to use that analysis and take a "broad-brush approach, so as to reflect the lack of precise economic equivalence between the reasons that would have accompanied the actual and hypothetical disclosures" (i.e. qualitative difference) and applied a discount of 15% to the losses.

The applicant was not required to address the uncertainty by using other methods to establish loss, such as a fundamental analysis or valuation of shares (each of which has limitations). The Full Court described that as "different ways of approaching the same, ultimately unknowable, question". The critical issue was whether the applicant had adduced a "sufficient evidentiary basis" for the quantification of his loss. He had.

That is in contrast to the approach in Zonia Holdings where the facilitation principle was not enlivened. In that case, it was clear that the full amount of the share price decline was attributable, in part, to other factors and the applicant made no attempt to adduce evidence separating out the impact of those factors.

The ultimate approach to these issues will depend on the approach taken by the High Court in Zonia Holdings.

What next?

Proving shareholder loss is complex. These developments may pave the way for the future conduct of shareholder class actions, removing some of the difficulties faced by shareholders to date in successfully prosecuting their claims.

The decision highlights that while market-based causation is well established as a doctrine, there may be grounds to challenge the existence of market efficiency for particular securities (for example, by reference to trading volumes, limited analyst commentary or demonstrated insensitivity to information releases).

Where market-based causation is available, event study evidence will remain centrally important. Issues surrounding 'economic equivalence' will remain a focus and courts may be assisted by expert evidence directed to identifying appropriate discounts in cases where there is no economic equivalence (between the hypothetical corrective disclosure and the actual disclosure a company made to the market).

While it is too early to predict (and particularly as guidance from the High Court on these critical issues is pending), the approach ultimately taken to these issues will have a significant impact on the shareholder class action landscape in Australia.

These developments serve as a timely reminder of the ongoing shareholder class action risk facing companies, and the need to have robust policies and procedures in place to facilitate compliance with continuous disclosure obligations.