Crowley v Worley Limited: A shift in security class action law in Australia

The April 2026 Federal Court decision in Southernwood v Brambles Limited marked a significant turning point in Australian securities class actions, becoming the first shareholder class action in Australia to succeed at trial. Although that decision will be subject to appeal, and the High Court is to about to consider the appeal and cross-appeal in Zonia Holdings Pty v Commonwealth Bank of Australia [2025] FCAFC 63, there is a shifting landscape in security class action law in Australia.

This was confirmed by the unanimous decision of the Full Court of the Federal Court in Crowley v Worley Limited [2026] FCAFC 78handed down on 28 May 2026, which also ruled in favour of the applicant. It is the first Full Court endorsement of market-based causation, and it adopts a lower evidentiary threshold for proving causation and loss than had been applied in earlier securities class action first instance judgments in Australia.

Background

On 14 August 2013, Worley Limited (Worley) announced its FY2013 results, including NPAT of $322 million, and contemporaneously represented to the market that it expected increased earnings in FY2014. That representation was conveyed as having a reasonable or “solid” foundation and was underpinned by Worley’s internal FY2014 budget, which forecast NPAT of approximately $352 million. Worley reaffirmed that guidance in October 2013. However, on 20 November 2013, it issued revised guidance materially downgrading its forecast FY2014 NPAT to a range of $260 million to $300 million.

A representative shareholder class action was then commenced on behalf of persons who acquired shares in Worley during the period 14 August 2013 to 19 November 2013, alleging that the August (and repeated October) guidance was misleading and involved contraventions of continuous disclosure obligations, with the consequence that the market price of Worley shares was inflated during that period and loss was suffered.

Following an earlier appeal, the matter was remitted to a single judge (Jackman J) to determine liability, causation and loss. His Honour found that Worley had engaged in contravening conduct, but that the applicant had failed to establish causation or quantify any loss, in substance because share price inflation had not been shown and the evidentiary record did not permit assessment of damages.

Full Court Decision

On appeal, the Full Court upheld findings that Worley’s earnings guidance contravened continuous disclosure obligations and constituted misleading or deceptive conduct. It also found that causation and loss had been established.

Causation

A significant development was the Full Court’s strong endorsement of market-based causation, describing it as ‘fundamental orthodoxy’ in shareholder class actions. The Court reached this conclusion on the basis that:

• the market price of a security that is traded in a semi-strong, informationally efficient, market is an acceptable proxy for its true value. This is because in a such a market all publicly available information is taken to be fully reflected in current prices;
• once it is proved that the market is informationally efficient, it will follow that the market price will reflect the available information;
  
• the fundamental purpose of the continuous disclosure statutory regime in Australia is to ensure a well-informed market leading to greater investor confidence. It does so by ensuring that the trading of securities occurs on the basis of all material information of which the company is aware (unless an exception applies);
  
• if trading does not occur on this basis, then it is possible that the securities will trade at a price difference from that which they would have traded in a fully informed market. If they do, then that difference in price is properly regarded as being produced by the company’s breach;
  
• the fact that individual investors may not have been personally aware of the undisclosed information or may not have considered it material to their decision does not negate market-based causation; and
  
• a number of first instance decisions in Australia have considered and accepted market-based causation in shareholder class actions.

While the onus remains on the plaintiff to establish causation on the balance of probabilities, once it is established that a contravention has occurred because material information was not disclosed or a misrepresentation has been made to the market, the Court may infer that the omission or misrepresentation was a cause of some loss to shareholders by operation of a semi-strong, informationally efficient market. That inference is capable of being drawn by the whole of the evidence and common sense, and does not require expert evidence. Importantly, the Full Court accepted that a subsequent corrective disclosure which affected share price could be important evidence in determining whether causation was established, even where the corrective disclosure is not economically equivalent to the alleged or established contraventions.

Loss

The Full Court held that once the applicant had established that the alleged contraventions had caused some loss, then the Court had the responsibility to assess the quantum of loss as best it could.

The Full Court held that requiring proof of loss to a specific counterfactual on the balance of probabilities was not required. To require an applicant to prove such a standard would be “to demand the impossible”. Rather, the Court is required to proceed by reference to the probabilities or possibilities of what would have happened if the contravention did not occur.

Where Worley’s own wrongdoing made quantification difficult, the Full Court applied the facilitation principle in Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17 (as considered in Zonia), affording the plaintiff a ‘fair wind’ but not a ‘free ride’.

In substance, this means that once causation of some loss had been established, the Court is required to assess loss as best it can and in doing so, will apply the ‘fair wind’ principle, permitting it to draw assumptions or inferences in favour of the applicant where difficulties arise in quantifying loss resulting from the breach.

Implications

Worley must be considered in the context of a rapidly evolving and changed landscape of risk for ASX-listed companies and their insurers. The findings by the Full Court in Worley are largely consistent with the conclusions reached by Justice Murphy in Brambles. Both decisions endorse market-based causation as a valid mechanism for establishing shareholder loss.

The Full Court’s decision in Zonia is now subject to High Court consideration. Providing judgment is ultimately delivered by the High Court in Zonia, we expect the Court to address materiality as well as the approach to event studies, confounding information, and quantification methodology. While Worley distinguished Zonia on its facts, it endorsed similar principles regarding the facilitation principle and economic equivalence. The High Court's judgment in Zonia will hopefully provide further clarification of these principles.

However, as it stands:

• There is now endorsement of market-based causation at Full Court level, combined with the lowered threshold for proving causation of some loss. Plaintiffs need not prove with precision how individual investors would have reacted to a hypothetical disclosure – the market mechanism provides the causal link. Further, price corrective disclosures may assist a plaintiff in establishing causation, even where the corrective disclosure is not economically equivalent to the alleged contraventions.
  
• The evidentiary burden on loss appears to have been lowered. Where a company's own contravention has made quantification difficult, it may not be necessary to prove a precise quantum counterfactual scenario. The price effects and loss may be inferred from available evidence in the context of the Court doing its best to assess the quantum of loss where causation has been established. Quantification can involve a degree of approximation and inference rather than precise economic modelling.
  
• The combined effect of Worley and Brambles, pending the High Court’s consideration of Zonia, creates a friendlier environment for plaintiff law firms and litigation funders considering pursuing securities class actions. Further, pricing and underwriting of D&O policies must be considered against this context. Pending the High Court’s determination of Zonia, these recent decisions lower the bar for plaintiffs to establish causation and to quantify loss, being the two elements that had caused all earlier security class actions that ran to judgment in Australia to fail.