Aussie shareholders could be in line for more than $100 million in compensation after a landmark Federal Court ruling. Logistics giant Brambles was found to have breached its continuous disclosure obligations, in a judgment handed down more than three years after a class action trial.
Justice Bernard Murphy found the chain logistics company did not have “reasonable grounds” for the profit guidance it gave in 2016-2017. It was found that the ASX-listed company engaged in misleading or deceptive conduct and breached its continuous disclosure obligations between November 2016 and January 2017.
The class action, launched by Maurice Blackburn and Slater & Gordon, alleged Brambles gave misleading guidance that encouraged shareholders to buy shares at inflated prices. Brambles’ shares then tumbled nearly 16 per cent after it withdrew the guidance.
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Maurice Blackburn head of class actions, Rebecca Gilsenan, said the case delivered a “ground-breaking outcome”.
“This marks the first time in Australian legal history that plaintiffs in a shareholder class action have been successful following trial,” she said.
“Australia’s financial markets rely on timely, accurate and complete disclosure of material information so investors can 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.”
Justice Murphy found that group applicants should be awarded compensation reflecting share price declines. Lawyers estimate the total compensation bill could be more than $100 million.
The class action argued Brambles, which supplies CHEP plastic and wooden pallets, misled investors when it reaffirmed earnings guidance for the 2017 financial year in October and November 2016.
Two months later in January 2017, it slashed its profit outlook and stated full-year profits would be lower than forecast due to falling demand for pallets in the US. This triggered a 15.8 per cent fall in its share price.
About a month later, the company downgraded its guidance again, sparking a further 9.9 per cent drop.
Murphy found Brambles “took too long” to withdraw its earnings guidance when it became clear the company would not be able to meet it.