A Landmark Ruling for Aussie Shareholders
Aussie shareholders may soon be in line for more than $100 million in compensation following a significant Federal Court ruling. This case marks a turning point in the legal landscape for shareholder class actions, as it is the first time plaintiffs have successfully won such a case after a trial.
The logistics giant Brambles was found to have breached its continuous disclosure obligations. The judgment came over three years after a class action trial, highlighting the complexity and duration of such legal proceedings.
Justice Bernard Murphy determined that Brambles did not have “reasonable grounds” for the profit guidance it provided during the 2016-2017 period. It was also found that the company engaged in misleading or deceptive conduct, violating its continuous disclosure obligations between November 2016 and January 2017.
The class action was initiated by Maurice Blackburn and Slater & Gordon, who alleged that Brambles gave misleading guidance that encouraged shareholders to buy shares at inflated prices. Following the withdrawal of this guidance, Brambles’ shares dropped nearly 16 per cent.
The Significance of the Case
Rebecca Gilsenan, head of class actions at Maurice Blackburn, described the case as a “ground-breaking outcome.” She emphasized the importance of timely, accurate, and complete disclosure in Australia’s financial markets, which allows investors to make informed decisions.
“When that disclosure framework is not properly observed, the consequences are real and are borne by everyday people, through their individual shareholdings, their superannuation accounts and other investment vehicles,” she said.
Justice Murphy ruled that group applicants should receive compensation reflecting the decline in share prices. Legal experts estimate that the total compensation could exceed $100 million.
What Happened in the Case?
The class action argued that Brambles misled investors when it reaffirmed earnings guidance for the 2017 financial year in October and November 2016. Two months later, in January 2017, the company slashed its profit outlook, stating that full-year profits would be lower than forecast due to falling demand for pallets in the US. This led to a 15.8 per cent drop in its share price.
About a month later, the company downgraded its guidance again, causing an additional 9.9 per cent fall in the share price.
Murphy noted that Brambles took too long to withdraw its earnings guidance when it became clear that the company would not meet its targets. He stated, “The problem for Brambles was that a miss to the underlying profit budget of less than 1 per cent would mean that it would not achieve the FY17 guidance.”
Brambles’ Response
In a statement to the ASX, Brambles mentioned that it is reviewing the lengthy decision, which spans over 1,200 pages, to assess its position and potential grounds for appeal.
“Whilst Brambles has insurance arrangements in place, Brambles notes that the total quantum of the potential damages is currently uncertain and will not be known until the process for quantification of total damages has been completed and/or all avenues for appeal by either Brambles or the applicants are exhausted,” the company said.
“As a result, it is not possible at this stage to determine the financial impact of the judgment on Brambles, if any.”
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