Shareholder class action dismissed after full trial - Crowley v Worley

On 22 October 2020, for the first time, a shareholder class action was dismissed after a full trial in the Federal Court of Australia. The anticipated judgment, handed down by Justice Gleeson (recently appointed to the High Court of Australia) has been welcomed by defendant law firms and boards alike.  The judgment, however, largely turned on its own facts and should not be treated as a sign that the shareholder class actions currently being pursued in Australian courts will suffer the same fate.


In its 2013 annual report released on 14 August 2013, WorleyParsons Limited (as it was known then) (Worley) announced a FY13 net profit after tax (NPAT) of $322 million and stated that it expected to achieve “increased earnings in FY14” compared to its FY13 result.

On 10 October 2013, Worley in its strategy presentation to investors reiterated that it expected "improved earnings [for] FY14 across all sectors".  On 20 November 2013, Worley issued a revised guidance announcing a downgrade in earnings forecast with the company expecting to report underlying NPAT for FY14 in the range of $260 million to $300 million.  The corrective announcement on 20 November 2013, represented a significant profit downgrade against its FY13 result and there was a 26% fall in Worley’s share price, from $21.59 to $16). 

In October 2015, a shareholder class action commenced against Worley in the Federal Court of Australia by ACA Lawyers, which was later became part of Shine Lawyers.  


The applicant, Mr Larry Crowley, alleged that Worley breached its continuous disclosure obligations and engaged in misleading or deceptive conduct by failing to inform the market that:  

  1. the FY14 budget did not provide reasonable grounds for the 14 August 2013 earnings guidance (the “budget” case);
  2. Worley lacked a reasonable basis for maintaining the FY14 earnings guidance on or from 14 August 2013 and it failed to correct its FY14 earnings guidance (the “performance” case); and
  3. Worley was aware that market consensus expected it to deliver between $354 million and $368 million in NPAT for FY14 and on or from 14 August 2013, it was aware that its earnings were likely to fall materially short of that consensus expectation (the “consensus” case).

Key takeaways

  1. For an applicant to succeed in its claims, it must provide detailed and specific evidence capable of contradicting the respondent’s evidence (which is usually from experienced senior executives and officers).Evidence cannot simply be based on hindsight.
  2. A budget can be “overly optimistic” and have “insufficient allowance” for potential downsides but that does not necessarily mean it lacks reasonable grounds for an earnings guidance.
  3. The Court adopted Justice Beach’s approach in Myer (the first shareholder class action judgment in Australia) regarding materiality and assumed a departure or variance in earnings of 5% as “material” (TPT Patrol Pty Ltd as trustee for Amies Superannuation Fund v Myer Holdings Limited [2019] FCA 1747).