ASIC loses round one against Nuix but appeal and class action remain

On 23 April 2026, Justice Goodman of the Federal Court dismissed ASIC’s high-profile case against ASX-listed Nuix and its former directors.  ASIC had claimed that Nuix failed to update the market on declining revenue performance in the months after its December 2020 IPO.   In dismissing ASIC’s claims, the Court provided helpful guidance on financial forecasting and disclosure obligations for listed entities, which are summarised in this note. 

Additionally, Nuix’s half decade of litigation is far from over.  ASIC has appealed the decision in respect of Nuix (but not in relation to the directors).  Further, hearings for a separate shareholder class action brought on behalf of those who acquired shares in Nuix during and immediately after its IPO are also scheduled to begin in the Victorian Supreme Court on 3 August 2026.

Background

Nuix, an analytics and intelligence software company, listed on the ASX in December 2020.  Its listing was ‘billed as the biggest IPO’[1] of the year at an offer price of $5.31 per share and a market capitalisation of $1.7 billion. Nuix’s IPO prospectus forecast FY21 revenue of $193.5 million and annualised contract value (ACV) for FY21 of $199.6 million.  ACV was a common metric used by Nuix and other software companies to assess the total contract value of its software contracts on an annualised basis (removing fluctuations from multi-year deals).  

In two post-IPO announcements made to the ASX on 26 February and 8 March 2021, Nuix reaffirmed the initial forecasts made in its prospectus. Between 18 January and 25 February 2021, Nuix failed to disclose its half-year ACV results to December 2020 as had been expected.

On 21 April 2021, Nuix downgraded its forecasts relative to those in its prospectus to FY21 revenue of $180m to $185m and FY21 ACV of $168m to $177m.

Subsequently, Senator Deborah O’Neill publicly criticised ASIC and two senior ASIC commissioners for failing to act after being alerted to serious concerns with the Nuix prospectus.[2]  The then-new chairman of ASIC, Joe Longo, responded by stating that he was satisfied with the team who had reviewed the Nuix IPO prospectus, but noted that ASIC had begun an investigation into the company.[3]  Around a year later, ASIC sued Nuix and its former directors.

Claims

ASIC made three key legal claims:

• Misleading and deceptive conduct: Nuix engaged in misleading and deceptive conduct when it reaffirmed the guidance from its prospectus in its 26 February and 8 March 2021 ASX announcements, on the basis that it lacked reasonable grounds to do so. ASIC also claimed the misleading conduct persisted when Nuix subsequently failed to rectify this guidance, and that Nuix’s non-disclosure of its half-year ACV results in the period from 18 January to 25 February 2021 was also misleading. 

• Continuous disclosure: Nuix breached its continuous disclosure obligations by failing to disclose certain internal financial information in the period from 18 January to 21 April 2021. This internal information comprised the half-year ACV results, internal revenue forecasts and revised revenue forecasts, all of which ASIC claimed had been calculated by 13 April 2021. 

• Directors’ duties: that by causing or otherwise permitting Nuix to commit the contraventions above, the five directors of Nuix breached their common law and statutory duties to exercise their responsibilities as directors with care and diligence. That is, this was a “stepping stones” case by ASIC against the directors.

The Federal Court dismissed each of these claims and ordered ASIC to cover Nuix’s and the directors’ costs.

Key takeaways

• Implement a thorough process to ensure forecasts are based on reasonable grounds: The Court rejected ASIC’s submission that only those materials personally reviewed by the directors could be relied upon by Nuix to prove that its forecasts were based on reasonable grounds. The Court then proceeded to find that Nuix’s methods of forecasting revenue and ACV were based on reasonable grounds. Nuix’s forecasts were based on both “top down” and “bottom up” analysis, including confirmation from each region head that they considered their component of the budget / forecast to be reasonable. Expert evidence also supported Nuix’s position that the assumptions and inputs for the models underlying the forecasts were reasonable. The Court also noted that there is no one way to prepare a forecast, and minds may legitimately differ as to the appropriateness of the process and assumptions used. Companies and directors should therefore ensure that they implement a thorough process to prepare forecasts, and have clear assumptions which underpin them.
  
  
• 5% materiality threshold in ASX Guidance Note 8 affirmed: In dismissing ASIC’s claim that Nuix breached its continuous disclosure obligations, the Court affirmed the 5% materiality threshold in ASX Guidance Note 8 in respect of earnings that, absent convincing evidence or argument to the contrary, an entity should regard an expected variation in earnings compared to published guidance equal to or less than 5% as immaterial, and that the entity can presume that its guidance does not need updating.

• Documents in draft form should be clearly marked accordingly: The Court dismissed ASIC’s claim that Nuix failed to disclose certain internal financial information when it should have done so prior to 21 April 2021 on the basis that such internal forecasts were still in draft form. Nuix’s internal forecasts had been clearly marked as confidential drafts prepared for the purposes of discussion only, and did not present concluded views. This reiterates the importance of ensuring documents which are clearly drafts are marked as such in internal communications to ensure that listed companies can rely on the continuous disclosure carve-outs in ASX Listing Rule 3.1A for information which is insufficiently definitive or generated for internal management purposes only and is confidential.

• Avoid hindsight bias: The Court also noted the need to avoid applying hindsight bias in assessing claims relating to misleading and deceptive conduct and breach of continuous disclosure. In particular, the Court noted that analysis of the question of whether information ought to have been disclosed must be undertaken ex ante, and not by reference to the fact that a recommendation at a later date (i.e. following further analysis) may be similar to the recommendation at an earlier date (e.g. where it is insufficiently definitive).

• ASIC’s ‘stepping stones’ claims against directors: It was common ground that ASIC’s “stepping stones” claim against the directors required ASIC to prove that Nuix had contravened one of the relevant Corporations Act / ASIC Act disclosure provisions.  As ASIC failed to establish any contravention by Nuix, the “stepping stones” claim against the directors failed and it has not been appealed.  ASIC’s failed “stepping stones” claim was in essence that the directors had failed to take reasonable steps to prevent Nuix from making allegedly misleading statements and purportedly breaching its continuous disclosure obligations.  ASIC had sought to impose pecuniary penalties on the directors and orders for their disqualification.  ASIC’s loss against the directors of Nuix is small comfort to directors of listed entities, who continue to be exposed to the lottery of potential “stepping stones” claims and the attempted imposition of potentially severe civil penalties for conduct which involves no dishonesty or bad faith.