Continuous disclosure and market based causation

The recent case of Grant-Taylor v Babcock & Brown Ltd [2015] FCA 149 ended years of litigation which followed the high-profile collapse of Babcock & Brown (BBL).  The judgment in the class action brought by 72 different plaintiffs offers some useful insight into whether Australia will follow the US in accepting market-based causation in the context of shareholder actions.

Background

The proceeding was commenced by those plaintiffs who purchased shares in BBL during its final year of trading on the ASX.  At the beginning of February 2008 (when the first of the plaintiffs purchased their shares) the trading price was $16.76.   When the shares were last traded on 7 January 2009 the price had dropped to $0.33.  Following a trading halt, BBL was placed into administration and then subsequently liquidation.

Supreme Court of Victoria derails future of entrepreneurial class actions

The number of shareholder class actions in Australia continues to grow at an impressive rate.  However, a recent decision of the Supreme Court of Victoria has examined the limits of entrepreneurship by securities class action lawyers, and has reiterated concerns foreshadowed by the High Court regarding the funding of legal actions by lawyers.

Background

In Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No. 3) [2014] VSC 340, the lead plaintiff, Melbourne City Investments Pty Ltd (MCI) was controlled by solicitor, Mark Elliott, the company’s sole director and shareholder.  In 2013, MCI commenced separate securities class action proceedings against Treasury Wine Estates Limited (Treasury), WorleyParsons Limited (WorleyParsons) and Leighton Holdings Limited (Leighton), alleging misleading and deceptive conduct, and a failure by each company to satisfy its continuous disclosure obligations, contrary to various provisions of the Corporations Act 2001 (Cth).