In Southernwood v Brambles Ltd (No 3) [2026] FCA 418, the Federal Court of Australia delivered a decision that should be on the radar of every listed company in Australia. The Court found that Brambles Ltd (Brambles) misled the market and breached its continuous disclosure obligations by maintaining earnings guidance for FY17 that it no longer had reasonable grounds to support. Critically, the Court also found that shareholders suffered quantifiable loss as a result — a first in Australian shareholder class action history.

This is a landmark result. It is the first time that issues of liability, causation and loss have all been in the applicant shareholders' favour. While the decision provides important guidance on several issues that have long been contested, including the viability of market-based causation and the standard of economic equivalence required to prove loss, several of these issues are headed to the High Court, and we expect the final word is yet to come.

Background to the proceeding

The class action was brought against Brambles — a global supply-chain logistics company best known for its pallet pooling operations — on behalf of all shareholders who acquired Brambles shares between 18 August 2016 and 17 February 2017 (the Relevant Period).

The case centred on Brambles' earnings guidance for FY17 (FY17 Guidance) and certain targets for FY19 (FY19 Targets). When Brambles withdrew the FY17 Guidance on 23 January 2017 and the FY19 Targets on 20 February 2017, each withdrawal was accompanied by a significant share price decline. The applicants alleged that Brambles misled the market and breached its continuous disclosure obligations by making and continuing to reaffirm the FY17 Guidance and the FY19 Targets.

Liability — a partial victory for the applicants

The applicants succeeded on their liability claim in respect of the FY17 Guidance, but only from 16 November 2016 onwards. The outcome turned on whether Brambles had a reasonable basis for issuing and maintaining the guidance at each point in time. When Brambles first issued the FY17 Guidance on 18 August 2016 (and reiterated it on 20 October 2016), the Court found it had reasonable grounds to do so. However, as the year progressed and the company's actual performance deteriorated, those grounds fell away.

The applicants failed to establish their claims relating to the FY19 Targets at any point in time.

Why did the applicants' liability claim only partly succeed?

While Murphy J found that certain budget assumptions lacked a reasonable basis and that it was unlikely Brambles would repeat its very strong FY16 sales revenue growth, this alone did not mean the FY17 Guidance was indefensible when it was first given. The key question was whether there was still a reasonable pathway for Brambles to meet its guidance — and the Court placed significant weight on how much time the company had left to correct its course.

By November 2016, however, Murphy J considered it "crystal clear" that the FY17 Guidance lacked reasonable grounds. By that point, Brambles had persistently underperformed against its sales revenue and underlying profit budgets, missing targets in most months of FY17. Given the already aggressive nature of the budgets, the sustained pattern of underperformance and the failure of early reforecast assumptions, the Court held there were no reasonable grounds for maintaining the FY17 Guidance. The judgment highlights a practical learning for listed companies, in that guidance may be defensible when (or close to when) it is first issued, but that same guidance can become indefensible over time as contrary evidence accumulates — and companies must be prepared to act promptly and accordingly to correct the position.

The applicants did not succeed on the FY19 Targets because those targets were not due to be met for almost three years. Brambles presented evidence that multiple levers remained available to achieve the targets, and the Court accepted this evidence. This learning is an intuitive one and provides some comfort for listed companies, in that the longer the horizon for achieving guidance or a certain forecast, the greater the latitude a company will be afforded in maintaining it.

Why generic disclaimers won't protect you

Brambles sought to rely on the various disclaimers in its ASX announcements to defend the FY17 Guidance, arguing that the guidance was expressly subject to a warning that there was a material risk it would not be achieved, such that the hypothetical ordinary or reasonable investor would not understand those statements as a guarantee of future performance. The Court rejected this. Murphy J found that Brambles' disclaimers were "standard-form and generic" and likely to be treated as mere boilerplate. The Court also scrutinised the size, prominence and placement of the disclaimers — noting, for example, that they were often "buried" on the last slide of a presentation and were barely legible.

The Court drew a sharp contrast with the Iluka shareholder class action, where disclaimers were found to be effective. In Iluka, the disclaimers were "in clear print, in a prominent position on the first page of the relevant document, were not in standard form, [and] identified the specific economic circumstances prevailing at the time… that made forecasting difficult." Brambles' boilerplate approach fell well short of this standard.

Together, Brambles and Iluka provide a practical framework for companies assessing the adequacy of their disclaimers. The two judgments serve to demonstrate that generic, catch-all disclaimers will not suffice. To be effective, disclaimers must be tailored to the specific circumstances of the guidance being given, identify the particular risks and uncertainties at play, and be presented prominently — not buried in fine print.

Causation and loss — a first in Australia

The most significant aspect of the judgment is the Court's finding on causation and loss. For the first time in an Australian shareholder class action, the Court found that shareholders had established both that the company's contravening conduct caused their loss, and the Court quantified that loss.

Market-based causation: the framework

Market-based causation (or indirect causation) is a legal theory that allows shareholders to claim damages without proving they directly read or relied on a company's misleading statements. The logic is straightforward: if a company's misrepresentations inflated its share price, then shareholders who bought at that inflated price suffered a loss by purchasing those shares at the inflated price.

Murphy J applied this principle in practice for the first time in Australia.

In doing so, the Court considered two key questions:

1. did the announcement cause a statistically significant share price variation (labelled as movement in Brambles' share price (the "excess" or "abnormal" return), and if so, what was the value of that movement; and
2. was there "economic equivalence" between the actual announcement that caused the share price drop and the counterfactual (hypothetical) announcement that Brambles should have made at an earlier point in time (explained further below).

Quantifying the excess return

Both parties agreed that an "event study" was the appropriate method to measure the share price impact of the 23 January 2017 announcement (which included the withdrawal of the FY17 Guidance – the January Disclosure). In simple terms, an event study is a statistical analysis used to measure the abnormal return in a company's share price caused by a specific event, after stripping out broader market and industry movements. The resulting figure – the "excess return" – serves as a proxy for the value of the event. Two competing experts found that the excess return following the January Disclosure was $1.85 per share, which the Court accepted.

Murphy J also adopted a 'common sense' approach, observing that earnings guidance announcements for a company like Brambles would plainly be influential to investor decision-making. His Honour considered the likelihood that Brambles would not achieve its FY17 Guidance was important information that would cause shareholders to downwardly revise their expectations.

Economic equivalence

The next – and arguably most significant – challenge was for the applicants to show that the information in the January Disclosure was, in substance, equivalent to the information that it was alleged Brambles should have disclosed earlier. This is a hurdle that applicants in previous shareholder class actions could not overcome, even where liability was established. It was a critical battleground in this case.

Brambles argued that the January Disclosure was not economically equivalent to the information the applicants said should have been disclosed in November 2016 (November Information). Brambles' arguments included that: (i) the January Disclosure was expressed in certain terms, whereas the November Information was vague; (ii) the January Disclosure contained other information that may have independently affected Brambles' share price; and (iii) the January Disclosure provided materially different context to the market.

These arguments were rejected. Murphy J held that it was not appropriate to take an overly technical approach requiring proof of exact economic equivalence. His Honour held that the goal of an event study is "substantial" economic equivalence – a reasonable proxy for what would have happened if the November Information had been disclosed on time, not a perfect calculation. Requiring perfect precision would hold the applicants to an unrealistically high standard, particularly as many of the complicating factors in its January Disclosure that Brambles pointed to in order to challenge economic equivalence would not have existed had the relevant disclosure been made earlier. As discussed below, this approach appears to differ from that taken in Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Limited [2025] FCAFC 63 (the CBA Shareholder Class Action).

Apportionment of share price inflation

On the basis of these findings, Murphy J awarded compensation by reference to the $1.85 per share abnormal return following the January Disclosure. However, because Brambles' misleading conduct in relation to underlying profit growth commenced on 16 November 2016, while its misleading conduct in relation to sales revenue growth commenced later on 21 December 2016, the full $1.85 figure could not simply be applied across the entire contravening period.

Despite there being no expert evidence on how to split the $1.85 between these two pieces of information, the Court undertook its own assessment based on the available evidence. Drawing on contemporaneous analyst commentary, Murphy J attributed 85% of the abnormal return ($1.57) to the underlying profit growth information and 15% of the abnormal return ($0.28) to the sales revenue growth information. The Court's willingness to undertake this exercise without specific expert evidence stands in contrast to the approach taken in CBA.

How does this compare with the CBA shareholder class action?

In the CBA Shareholder Class Action, the Full Federal Court found the bank had breached its statutory obligations, but the applicants were unable to establish that shareholders suffered any loss. That decision has been appealed to the High Court.

Murphy J specifically distinguished the CBA Shareholder Class Action. In that action, the Court found there was no rational starting point for the parties to undertake an event study, as there was no economic equivalence between the actual disclosure and the counterfactual disclosure. In Brambles, the Court found that this economic equivalence did exist, giving it a basis from which to apply the event study to quantify loss.

Two notable points of divergence emerge:

1. In Brambles, the Court was willing to apportion the $1.85 figure without specific evidence on apportionment. In the CBA Shareholder Class Action, the applicants asked the Court to do the best it could with the loss evidence produced and make appropriate discounts as considered appropriate, which the Court declined to do for several reasons, including that it was inconsistent with the general principle that an applicant must establish the loss suffered.
2. The adoption of "substantial economic equivalence" appears to represent a lower threshold than that applied in previous class actions (including the CBA Shareholder Class Action and Crowley v Worley Limited (No 2) [2023] FCA 1613), which have required greater precision from applicants in establishing the equivalence between actual and counterfactual disclosures.

What this means for listed companies, executives and directors

1. Maintaining optimistic or aggressive market guidance in the face of deteriorating results carries real risk. While the Court recognised that companies may need time to address underperformance, the critical question, following Brambles, is whether a reasonable pathway exists to actually meet the guidance within the relevant timeframe. Boards and management will need to have clear evidence of the processes in place to regularly reassess whether outstanding guidance remains defensible and, of course, should update the market promptly when it is not.
2. Generic, boilerplate disclaimers will not protect your disclosures. To be effective, disclaimers must be prominent, legible, placed near the relevant statement, and tailored to the specific risks and uncertainties at hand.
3. This is the first Australian shareholder class action to apply market-based causation in practice and determine a resultant loss. Shareholders do not need to prove they personally read or relied on a company's misleading statements to recover loss. Purchasing shares at an inflated price is enough.
4. Precise economic equivalence between the actual and counterfactual disclosure may not be required – only "substantial economic equivalence". Overly technical arguments about the appropriateness of counterfactual information are unlikely (subject to the High Court's consideration of these matters) to succeed. This appears to lower the bar set in previous cases and may make it easier for applicants to establish loss in future shareholder class actions.
5. The CBA Shareholder Class Action has been appealed to the High Court, and key issues including causation and loss remain live. Until the High Court rules, the full implications of the Brambles decision for players on both sides of the Australian shareholder class action landscape are likely to remain uncertain.

We will continue to track these developments.

For further insight into how these developments may affect your business, please contact the relevant MinterEllison team members listed below.