Following a wait of 1261 days the Federal Court delivered its judgment in Southernwood v Brambles Limited (No 3) [2026] FCA 418 (Brambles). The decision does not change the statutory framework governing continuous disclosure, but clarifies, with precision, the point when commercial judgement gives way to legal liability. In doing so, it materially alters the risk landscape for listed entities with the caveat that the High Court’s forthcoming decision in Zonia Holdings Pty Ltd v Commonwealth Bank of Australia (CBA) is expected to set the trend for securities class actions in Australia. Brambles has served as a warning for publicly traded companies to consider the adequacy of their policy limits for directors’ and officers liability (D&O). Particularly the limits for securities claims brought against the company (Side C).
Background
Earnings guidance was issued by Brambles Limited in August 2016. At that time, it projected revenue growth of between 7 and 9 per cet and band profit growth of between 9 and 11 per cent. Those forecasts were communicated to the market in conventional terms and accompanied by standard form disclaimers.
Brambles’ US came under material pressure. Contemporaneous documents demonstrated that budgets were ambitious and “stretched”, with known risks to their achievability. Notwithstanding this, the company reaffirmed its guidance through October and November 2016. The Court found that by mid-November 2016, Brambles no longer had reasonable grounds for maintaining those forecasts. Yet no corrective disclosure was made until late January 2017 with additional clarification provided in February. That period became the critical window for liability.
Justice Murphy approached the decision in this matter through the framework of misleading conduct and continuous disclosure. What distinguishes the judgment in Brambles, however, is the way those principles were applied dynamically. His Honour accepted that the August guidance constituted a “continuing representation”, such that its accuracy required reassessment over time. As his Honour explained at 865:
“If [representations] were not misleading or deceptive at the time that Brambles made them, they could be falsified by subsequent events such that they became misleading or deceptive at that time if… there was an absence of reasonable grounds… at any point in time during which the representations were continuing.”
This finding is critical as it confirms that disclosure is not a static exercise. It imposes a continuing obligation on listed entities to test whether previously disclosed expectations remain supported by reasonable grounds.
The Court reinforced the statutory position in relation to future matters, observing at paragraph 135:
“A representation with respect to a future matter is taken to be misleading if the representor did not have reasonable grounds for making that representation.”
More significantly, the Court emphasised at paragraph 54, the objective nature of liability:
“A contravention may occur without knowledge or fault on the part of the corporation, and notwithstanding the exercise of reasonable care.”
This articulation represents a material shift in how directors should view the exposure. Critically, liability does not depend upon dishonesty, intent or even actual knowledge but from the failure to respond appropriately to circumstances as they evolve.
Material information to be disclosed, promptly
As regards continuous disclosure, the Court reaffirmed that a listed entity must disclose information that is not generally available and which a reasonable person (investor) would expect to have a material effect on share value. In that regard “material information” extends beyond realised outcomes to encompass emerging risk. The Court confirmed that the market is entitled to expect that companies will correct information that is no longer accurate, stating at paragraph 55:
“Market participants have a reasonable expectation that a listed company will act lawfully in complying with its obligation to make any material disclosures to the market, including by correcting information that is no longer accurate, if it is material and not generally available.”
The practical consequence is that disclosure is triggered, not when failure is certain, but when risk becomes sufficiently real that it would influence an investor’s decision-making.
Market causation
The Court accepted the applicants’ case based on “active indirect market-based causation”, confirming that in an efficient market, misleading or incomplete information distorts price. Investors who acquire securities at that price are taken to suffer loss when the truth emerges.
Market-based causation is the principle that in an efficient market, a company’s share price reflects all available information. Where that information is misleading or incomplete, the price is artificially inflated, and investors who acquire shares at that price are taken to have suffered loss when the truth is revealed.
At paragraph 3976 of the judgment, the Court accepted that Brambles’ shares traded at artificially inflated prices and that corrective disclosures “removed some, but not all, of the inflation… and [then] removed the balance of inflation”.
The decision is therefore equally important for its treatment of market causation and ensuing loss. This is critical in distinguishing Brambles from past cases.
What has changed?
Relevantly in TPT Patrol Pty Ltd v Myer Holdings Ltd [2019] FCA 1747 market-based causation was accepted in principle, but the claim failed on the evidence as to price inflation. Its implications at the time were traversed in an article by Bellrock on 15 November 2019 which discussed insurer appetite for D&O (see here).
In Brambles, inflation was not only established, but measured and unwound through corrective disclosure. That evidentiary step converts theoretical exposure into realised liability.
From a governance perspective, the judgment underscores that directors must ensure that internal systems do more than exist, they must operate effectively in real time. Forecasts must be interrogated, assumptions challenged, and deteriorating performance escalated without delay. The Court’s reasoning makes clear that reliance on optimism, historical performance or generic disclaimers will not suffice.
Key takeaway for companies
The Brambles decision does not change the law, but it changes how the law is applied in practice. It reinforces that continuous disclosure is a dynamic obligation requiring vigilance and speed. It also highlights that the financial consequences of failing to meet that standard can be substantial, both in terms of damages and the cost of defence. Ultimately, the distinction between acceptable commercial judgement and actionable non-disclosure is no longer measured solely by what was said, but by when it was said.
Brambles: not the final word
The Full Court has yet to consider these issues, and more importantly, the High Court is poised to do so in the upcoming CBA matter expected to be heard in mid-2026. That proceeding is widely regarded as the most significant shareholder class action to reach the High Court in decades.
The issues before the High Court in CBA are broader than Brambles. They extend beyond the mechanics of disclosure into questions of awareness, attribution, causation and the evidentiary burden required to establish shareholder loss.
It follows that until the High Court provides authoritative guidance, the single judge decision in Brambles should be applied with a degree of caution. The position for shareholder class actions in Australia will ultimately depend on how the High Court resolves the issues in CBA. That said, we see that Brambles is enough to trigger enquiries into D&O limit adequacy.
D&O insurance implications
For an understanding of how D&O insurance works, please refer to our product fundamentals article which may be found here. In summary:
- “Side A” cover for non-indemnifiable loss enlivens for natural persons (directors or officers) where allegations are made against them in connection with their management of the company. Indemnity is only available where the company cannot for instance indemnify the director and/or officer if the company is impecunious).
- “Side B” cover for indemnifiable loss that has been paid by the company enlivens to cover “indemnifiable loss” that the company promises to pay on behalf of its directors and officers.
- “Side C” covers the company for costs and expenses it incurs in defending a securities claim. In the event the company has liability, the insurer will pay damages (including claimants’ costs and expenses). Ordinarily defence costs and damages are included in the policy limit of indemnity.
The implications following Brambles are relevant in respect of Side C coverage. It demonstrates how shareholder class actions expose the company directly, with defence costs and any ultimate settlement or judgment eroding those limits.
Where limits are insufficient, the residual exposure may ultimately affect directors, particularly where Side A and Side B protections are engaged following exhaustion of the primary layer. In that regard, the availability of coverage for natural person remains very much coverage that should be “ring-fenced” to protect directors and officers.
Brambles has prompted a reassessment by Bellrock of how limits of indemnity should be calibrated for ASX-listed companies. It is increasingly apparent that the question is not whether insurance exists, but whether it is sufficient in light of modern class action dynamics.
From our research to the end of 2025 we consider settlement figures materially understate the true cost of class action proceedings. Defence costs alone are significant. Contested matters run by top-tier firms are typically forecast at around $20M, while mid-tier firms generally range between $8M and $12M. Even where matters resolve earlier, costs remain substantial at approximately $6M for early mediation (pre-evidence), increasing from $12M to $15M where settlement occurs post-evidence but prior to trial.
These figures are being driven higher by sustained cost inflation across the legal market. Over the past 18 to 24 months, there have been consistent above-inflation increases in legal fees. Partner rates now commonly exceed $1,000 per hour, with some reaching $1,600, while associate rates sit in the $700–$800 range, and paralegal rates approach $600 per hour. Senior Counsel fees have similarly escalated, with daily rates typically between $15,000 and $25,000, and premium rates increasingly applied outside standard hours.
It follows that against that backdrop, Bellrock’s view is that boards must take a more structured approach to determining appropriate limits of indemnity. In doing so, companies should have regard to a range of factors including market capitalisation, share price volatility, industry risk profile, historical claims experience, and the increasing cost of defending complex securities litigation. These considerations should be assessed holistically, rather than relying on historical benchmarks or legacy programme structures.
