Shareholder class actions – what are they and how do they work in Australia?
Shareholder class actions are brought by groups of shareholders against a publicly traded company and/or its directors and officers for similar losses. They commonly allege failures of continuous disclosure or misleading market conduct, said to have caused loss when shareholders traded on inaccurate information.
Australia’s class action framework is based on the Federal Court of Australia’s representative proceedings regime (Regime). The threshold to commence an action is relatively low: seven or more group members, claims arising from the same, similar or related circumstances, and at least one substantial common issue of law or fact.
Actions may be brought in the Federal Court or a Supreme Court, including New South Wales (best beaches) and Victoria (best coffee), where the legislation is modelled on the Regime. Victoria remains a popular class action jurisdiction because it is currently the only State where the Court expressly may approve a group costs order (sometimes known as a 'contingency fee'), under which applicants’ solicitors’ fees are calculated as a percentage of any award or settlement. Since group costs orders were introduced in Victoria, filings there have increased, with a corresponding decrease elsewhere.
Shareholder class actions typically take three to seven years from commencement to judgment and most settle before final determination. Any settlement requires court approval. In assessing approval, the Court considers the reasonableness of the total settlement sum and deductions from it, including for lawyers, litigation funders and insurance premiums.
Class actions are expensive, and net returns to group members can be for 50% or less after lawyers and funders are paid. Courts have also shown willingness at settlement approval to reduce excessive costs and uplift fees. For example, in a 2021 Westpac class action settlement, the Federal Court reduced applicants’ legal costs from about $5.8m to $5m, including about $460,000 in uplift fees found to be not properly chargeable under the Regime[1].
History of shareholder class actions in Australia
In 1992, the Regime introduced Australia’s statutory class action process.
In 2001, reforms to corporations and securities laws introduced continuous disclosure obligations for listed entities, stronger misleading and deceptive conduct provisions and heightened market integrity regulation. Together, they created new potential causes of action for shareholders. The growth of litigation funding also made large-scale shareholder claims practically more feasible.
The 2000s saw the first major wave of Australian shareholder class actions. The 2010s brought further growth, driven by greater shareholder participation, acceptance of “market-based causation” arguments and focus on continuous disclosure compliance. This affected D&O underwriter profitability, making cover harder to obtain and increasing premiums.
However, shareholder class actions had limited success. Even where companies breached disclosure obligations, shareholders often struggled to prove causation and loss. After several high-profile failures, including in Myer Holdings (a large Australian departments store)[2], their popularity waned. Litigation funders shifted focus to other categories, including consumer claims such as the Mercedes-Benz proceeding currently before the Supreme Court of Victoria.
Revival of Australian shareholder class actions – Brambles, Worley and Zonia
Three recent Federal Court decisions may re-ignite enthusiasm for shareholder class actions in Australia: Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Limited [2025] FCAFC 63 (Zonia), Southernwood v Brambles Limited (No 3) [2026] FCA 418 (Brambles) and Crowley v Worley Limited [2026] FCAFC 78 (Worley).
Brambles was commenced in 2018 and decided in 2026. Shareholders alleged Brambles misled the market about its FY17 financial prospects and failed to disclose information showing it was unlikely to meet those forecasts. In April 2026, judgment was delivered for shareholders — the first time in Australia shareholders succeeded on liability, causation and loss. They established that Brambles’ contraventions were proven, the undisclosed information and misleading guidance were price-sensitive, and the market price was inflated until the truth emerged.
Worley was commenced in 2015, decided in 2026 and concerned Worley’s August 2013 guidance that FY14 earnings would exceed the previous year, based on an internal budget forecasting about $352m net profit after tax. Shareholders alleged Worley lacked reasonable grounds for providing that guidance, failed to disclose material information and that this caused them to pay an inflated share price. In May 2026, the Court found for shareholders, holding that the guidance lacked reasonable grounds, senior management knew of significant forecasting problems attributable to Worley and the guidance inflated the share price.
Critically, in both Brambles and Worley, the Court accepted a lower causation threshold and an imperfect loss calculation where precision was not possible. Shareholders did not need to prove personal reliance on a misleading statement; it was enough to show the misinformation inflated the market price they paid.
Pending judgment in the Zonia appeal
Following the decisions in Brambles and Worley, shareholders in Zonia were granted leave to appeal to the High Court in February 2026. Their unsuccessful claim against the Commonwealth Bank of Australia (CBA) concerned CBA’s failure to disclose deposit machine issues, in breach of compliance obligations. Breach findings have already been made, so the appeal concerns the correct approach to causation and shareholder loss. The appeal was heard in June 2026 and judgment is reserved.
If the appeal succeeds and the High Court confirms Brambles and Worley, causation and loss may become less significant barriers to securities actions. We would then expect shareholder class actions — and demand for larger settlements — to increase significantly.
What’s to come and takeaways for Insurers
While we await the Zonia appeal decision — perhaps from (lazing on) an Australian beach — shareholder class action filings have slowed. If Zonia aligns with Brambles and Worley, insurers can expect:
- more shareholder class action claims and notifications; and
- a greater appetite for shareholders (or their funders) to run matters to trial and/or demand larger settlements.
In the meantime, Underwriters should continue careful due diligence on insureds, while recognising that shareholder class actions can still arise and are inevitably costly and price accordingly. When claims and notifications arise, the priority is proactive management: get across the issues early, obtain early and specialised advice on liability and exposure so that informed decisions on strategy, costs protection and settlement can be reached. Advice from practitioners aligned with insurers’ approach to resolution is likely to limit exposure and shorten claim life cycles.
[1] Lenthall v Westpac Banking Corporation (No 3) [2021] FCA 1004.
[2] TPT Patrol Pty Ltd as trustees for Amies Superannuation Fund v Myer Holdings Limited [2019] FCA 1747, which confirmed that continuous disclosure obligations remain central to shareholder claims and proving loss and causation are a distinct and often difficult requirement.
