The Supreme Court of New South Wales’ decision in the matter of Regional Express Holdings Ltd [2026] NSWSC 756 (Rex) demonstrates a recurring feature of Australian corporate regulation: Companies can breach the law even where the Australian Securities and Investment Commission (ASIC) cannot establish personal liability against their non-executive directors. The decision provides an important illustration of how the courts distinguish between corporate knowledge and directors’ knowledge, and why reasonable grounds, information flow and governance systems remain central to continuous disclosure obligations.
The case is another example of a listed entity making an optimistic forward-looking statement, failing to maintain reasonable grounds for it, and then failing to correct the market when those grounds evaporated. Here, the Supreme Court of NSW found that Rex breached its continuous disclosure obligations. The Rex executive chair, Mr Lim, admitted liability. Importantly, and what warrants further discussion, is the ASIC’s failure to establish wrongdoing against three non executive directors, despite the same deteriorating financial information circulating within the organisation.
The judgment exposes a familiar pattern in Australian disclosure litigation: The company falls, the executive falls, the non executives walk. It also reveals how management controlled information flows can insulate directors from liability, even when the company itself is found to have breached its statutory obligations.
The announcement that started it all
On 28 February 2023, Rex released an ASX announcement stating it was: “optimistic that the Group will have positive operating profits for the full FY23 barring any further external shocks.”
This statement became the fulcrum of ASIC’s case. The regulator alleged that Rex lacked reasonable grounds for the optimism and that the company failed to correct the statement until 20 June 2023 despite mounting evidence that the forecast was untenable.
The Court did not accept ASIC’s argument that the 28 February statement was misleading the moment it was made. That is an important distinction. The breach was not the making of the statement, but the failure to correct it once reasonable grounds evaporated. By 14 April 2023, those reasonable grounds had plainly evaporated.
From February to April 2023, Rex’s internal reporting showed a clear and accelerating deterioration. Passenger revenue was declining. Domestic routes, which accounted for nearly half of group revenue, were underperforming. The regional business was more stable but insufficient to offset the volatility. Industry wide downturns were evident. Flight cancellations caused by staffing shortages were affecting revenue. Seasonality patterns pointed to weaker performance in the second half of the financial year. Monthly operating losses were increasing.
None of these developments were subtle. It was measurable, documented, and known within management. Expert evidence confirmed that by every relevant date after 14 April 2023, it was unlikely Rex would achieve positive operating profits for FY23. The Court accepted that evidence and made the declaration that Rex contravened its continuous disclosure obligations under s 674A(2) of the Corporations Act.
The governance structure that enabled the failure
The judgment revealed a governance structure at Rex that made disclosure failure almost inevitable. Rex’s board met only quarterly. Management committee meetings occurred more frequently and filtered information before it reached directors. The executive chair, Mr Lim, controlled what information was presented to the board. Slides showing deteriorating performance were included in board packs but not shown on screen during presentations. Directors were therefore exposed to a curated version of reality that emphasised domestic growth narratives while downplaying emerging financial risks.
This filtering mattered. The company is liable for what its executives know. When management knows the optimism is unfounded, the company knows, but directors are not automatically deemed to know what management knows. That distinction became central to the Court’s reasoning.
Why the directors walked: The Court’s reluctance to impose personal liability
ASIC contended that three non executive directors contravened s180 by failing to take reasonable steps to ensure Rex complied with its continuous disclosure obligations.
First, His Honour focused on what ASIC had actually proved about the directors’ knowledge. The evidence showed that Mr Lim received more granular and frequent financial reporting than the non executive directors. He was involved in day-to-day operational decisions, including pricing and sales strategy. By contrast, the non executive directors engaged with the business at board level and through committees, with information mediated by management.
Evidence about board and management presentations was relevant here. It was explained that slides presented to the management committee were not always shown at board meetings, and that Mr Lim determined what would be emphasised. The Court accepted that this meant certain information about deteriorating performance did not have the same prominence in the boardroom as it did within management.
Secondly, the Court applied the Briginshaw standard to the directors’ duties claims. As ASIC sought pecuniary penalties and disqualification orders, His Honour required “clear and cogent” evidence of contravention. It was not enough to show that the information existed somewhere within the organisation; ASIC had to show that the non executive directors knew, or ought clearly to have known, the relevant facts and failed to act.
The Court was not satisfied that the evidence met this threshold. The internal reporting and expert analysis demonstrated that the company, through its executives, had lost reasonable grounds for optimism but ASIC could not bridge the gap between that corporate knowledge and the actual knowledge of the non executive directors.
Thirdly, the Court considered the standard of care under s180 in the context of non executive roles recognising that non executive directors are entitled to rely on management and on the company’s systems, particularly where there is no obvious reason to doubt the information provided. The evidence did not show that the non executive directors were confronted with clear, unambiguous signals that the 28 February optimism was untenable and then chose to ignore them.
Finally, the absence of internal forecasts, which harmed the company’s position on continuous disclosure, also limited ASIC’s ability to prove the directors’ duties claims. Without contemporaneous forecasting documents that had been put before the board, ASIC could not demonstrate that the non executive directors had been squarely presented with a picture of FY23 that made the optimism indefensible.
Critically to his decision to exonerate the directors, His Honour made the following finding [at 413]:
“the [NEDs] had less information about Rex’s daily performance than its executive chair and management team and, significantly [they] did not receive copies of Rex’s monthly management accounts until 5 June 2023, that date being after the contravention dates pleaded against them, and did not receive Rex’s monthly YTD profit before tax statements in the relevant period. I accept those matters are significant, and I also accept Mr Thomas’ submission that the other financial information that was provided to [the NEDs] was largely, although not entirely, directed to revenue and cash information and did not cover all segments of Rex’s business, or at least did not do so in a way that would allow ready analysis of the performance of the business as a whole or any ready calculation of profit or operating profit of Rex.”
On that basis, His Honour concluded that ASIC had not established that the non executive directors failed to discharge their duties under s180 or stated another way, the claims against the non-executive directors were not proved to the requisite standard.
Implications for listed companies and D&O insurers
1. Directors must demand unfiltered information
The Court’s reasoning suggests that directors can avoid liability if they rely on management, but insurers and governance professionals know this alone is not sustainable. Directors should:
- Insist on full visibility of financial data
- Require management to present all relevant information
- Request documented forecasts
- Interrogate optimistic statements.
2. Audit and governance committees must be more active
The fact that one of the non-executive directors, Mr Sharp, chaired the Audit and Corporate Governance Committee yet avoided liability shows how difficult it can be to prosecute directors, but it also highlights the need for committees to:
- Demand forecasting models
- Review seasonality impacts
- Challenge management’s assumptions.
Conclusion
Rex reinforces that the law draws an important distinction between the knowledge of a corporation and the knowledge of its individual directors. A company may breach its continuous disclosure obligations because the knowledge of its executives is attributed to it. Personal liability, however, requires ASIC to establish that a director knew, or ought reasonably to have known, the relevant facts and failed to act.
For boards, the message is straightforward. Directors cannot assume that management is presenting the whole picture. Governance systems should ensure that complete financial information, forecasts and downside scenarios reach the board in a timely manner. While those systems may ultimately protect directors from liability, more importantly such systems may prevent the company itself from committing the breach in the first place.
