Shareholders in ASX-listed company Brambles could receive millions of dollars in compensation nearly a decade after filing a class action, after the Federal Court found the logistics giant failed to keep investors informed about its true financial position.
Late on Friday evening, the Federal Court handed down a 1233-page judgment in which Justice Bernard Murphy found Brambles had engaged in misleading or deceptive conduct and that it had breached its continuous disclosure obligations between November 2016 and January 2017.
The class action, launched in 2017, argued the logistics giant had misled investors when it reaffirmed earnings guidance for the 2017 financial year in October and November 2016, and then it indicated about 11 weeks later that it would not meet that guidance, triggering a 15.8 per cent fall in its share price. About a month after that, Brambles once again downgraded guidance, sparking a further 9.9 per cent drop.
In his judgment, which comes after a five-week trial in late 2022, Murphy said Brambles “took too long” to withdraw its earnings guidance when it became clear the company would not be able to meet it.
“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,” he said.
In 2017, before the class action was officially filed, Maurice Blackburn class action principal Brooke Dellavedova said the compensation could be in the ballpark of $100 million.
On Sunday evening, a spokeswoman for Brambles said there were not yet clear figures for the potential liability the company faced.
“Whilst Brambles has insurance arrangements in place, the total quantum of the potential damages is currently uncertain and any reports of the potential quantum of damages at this stage are purely speculative,” she said.
The spokeswoman also said the majority of claims against Brambles had been dismissed in the judgment. “Brambles is reviewing the lengthy decision of over 1200 pages to assess its position, including the various grounds of appeal that may be open to Brambles,” she said.
In his judgment, Murphy laid out the formula for how some of the compensation could be calculated.
“85 per cent of the abnormal returns [on shares bought in the 35-day window between November 2016 and January 2017] should be attributed to the Contravening Conduct in respect to the FY17 guidance on underlying profit growth,” he said.
Maurice Blackburn head of class actions Rebecca Gilsenan said the outcome was an important win for shareholders and market integrity.
“This marks the first time in Australian legal history that plaintiffs in a shareholder class action have been successful following trial,” she said.
Investor class actions are typically settled before a verdict is reached.
“This outcome is a welcome correction to a run of decisions that have made it harder for shareholders to enforce their rights in relation to market disclosure.”
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Millie Muroi is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via X or email.