The landmark Federal Court decision by Justice Beach in the Myer class action is the first final judgment in a shareholder class action in Australia. While Myer breached its continuous disclosure obligations and engaged in misleading and deceptive conduct by failing to update its FY15 profit guidance, Justice Beach was not persuaded that the applicant and group members suffered any loss flowing from those contraventions and conduct. The decision also provides guidance on several key relevant legal principles relating to market disclosure obligations.

Key takeaways from the Myer class action case

• Guidance related statements made by company directors and senior management in earnings calls, annual general meetings (AGMs) and other conversations that are intended to be made publicly available, may be construed as formal guidance – notwithstanding how informal their manner of expression might be.
• In order to make out a claim under s 674 of the Corporations Act (the Act), it is necessary to identify with some precision the information the company was allegedly aware of and should have disclosed. An opinion held by senior management (e.g. a CEO and CFO) may be sufficient to constitute 'awareness' for the purposes of s 674. It follows that if senior management disagree (i.e. do not hold the same opinion) about internal information or a statement, it may not constitute 'awareness'.
• A variance of 5% to guidance may be material.
• Forecasts contained in analyst reports or consensus NPAT figures cannot be used as a proxy for information as to what a company expects its future earnings to look like, and accordingly is not information that is 'generally available' – in other words, companies who give express guidance may not be able to rely on analysts' identification of certain risks or challenges that are not disclosed by the company. The position may be different for companies which do not give express guidance however.
• The Court agreed with Myer's arguments in relation to the defence under Listing Rule 3.1A, in that the 'information' the applicant pointed to was 'insufficiently definite to warrant disclosure' because it was: (i) not presented to, nor approved by the board; (ii) incomplete and comprised draft working documents; (iii) contained opportunities and risks to achieving forecasts; and (iv) carried a high degree of speculation and uncertainty. However, the Court found that a company is unable to rely on this defence if it releases a statement that warrants correction once new information becomes known by it. Had Myer not made a public disclosure of its FY15 NPAT forecast, this defence would probably therefore have been available.
• Market-based causation has been accepted. Applicants do not need to prove that they and every single class member relied on a company's alleged contravening disclosure in deciding whether or not to purchase the company's shares, so long as they can prove that the misrepresentation or non-disclosure artificially inflated the company's share price.
• Applicants will need to identify what the company ought to have said (i.e. the counterfactual) in order to calculate the amount by which the price of shares was wrongfully inflated as a result of alleged contraventions. While Myer breached its continuous disclosure obligations and engaged in misleading or deceptive conduct, the Court found no share price inflation as a result of the contraventions, because the Applicant's expert used the wrong counterfactual. Even though a share price drop occurred on 19 March 2015, the Court found that this drop represented the market reacting to new information (that FY15 NPAT would be below analyst consensus), rather than the market reacting to the information that Myer's FY15 NPAT would be below FY14 NPAT.