ASX Shareholder Claims

The Only Claim Decided

On 21 April 2016, the Full Federal Court handed down its judgement, [2016] FCAFC60, confirming the trial justice’s decision in favour of Babcock & Brown.


NSW Registry, Federal Court of Australia (NSD289/2015).

The Facts

The proceeding was commenced in 2012 alleging that each of the plaintiffs (a group proceeding, not a class action) who had acquired shares in BBL between 21 February 2008 and 13 March 2009, suffered loss because BBL failed to disclose to the market that:

  • its final dividends for 2005, 2006 and 2007 had been paid unlawfully out of capital, rather than profits;
  • its financial reports for those years did not give a true and fair view of its financial position because they did not disclose that the final dividends had been paid out of capital, not profits;
  • it was insolvent as at 29 November 2008; and
  • the final dividend it paid in 2007 had been paid out of funds borrowed on the back of an asset revaluation.

Justice Perram, the trial judge, dismissed all of the plaintiffs’ claims, with costs (a decision not reversed on appeal). His honour found that BBL had not breached its continuous disclosure obligations by failing to disclose the matters set out above.

The Full Court decision addressed several construction questions (statutory purpose, information, expectation of material effect, meaning of “persons who commonly invest in securities”, is the information “generally available”, “readily observable matter”, the information was “made known”, with a “reasonable period” for its dissemination and “deductions, conclusions or inferences”).

The most important findings of the court centred upon:

Issue Finding
Whether the information was material Paying dividends out of capital wasn’t material
Did the accounts provide a time and fair view The accounting deficiencies had no economic consequence
Whether disclosure about insolvency was required No

The appeal was dismissed with costs awarded against the 77 individual shareholders as the claim was not conducted as a class action.


1. Pleading (2 May 2014).

2. Pleading (13 June 2014).

3. Substantive Hearing First Instance (4 March 2015).

4. Substantive Hearing On Appeal (21 April 2016).