Worley causation decision
The Full Federal Court delivered a judgment on 28 May 2026 concerning issues of causation and loss in the long-running Worley security holder class action, relating to FY14 profit guidance of $352 million given in August 2013 and revised downwards to a range of $260 million to $300 million in November 2013. The Worley share price fell materially after guidance was revised.
A brief history
The class action plaintiffs failed at the first trial, decided in 2020, then won an appeal to the Full Federal Court in 2022.
The matter was remitted to a single Federal Court judge, who decided that Worley had engaged in misleading and deceptive conduct because it did not have reasonable grounds to give the profit guidance in the first place, nor at any time until the guidance was revised. The judge also found that Worley had breached its continuous disclosure obligations.
However, the judge found that the class action plaintiffs had failed to establish that Worley’s conduct caused the plaintiffs loss or damage.
Worley appealed the breach findings and the plaintiffs appealed the causation findings. The Full Federal Court (the Appeal Court) decided that Worley’s appeal failed, but the plaintiffs’ appeal succeeded.
Causation and loss
The question on causation and loss considered by the Appeal Court in the latest proceedings was:
“ did the contraventions cause the market price to be substantially greater than the market price that would have prevailed but for the contraventions and if so by how much?”[1]
The remitter judge had answered that question “No”, having found, based on the evidence and a counterfactual realistic level of profit guidance at $317m, that whether Worley’s conduct caused a greater market price was no more than a real possibility and in any event there was no basis to quantify loss. The Appeal Court overturned those findings.
The causation and loss case involved a number of fundamental issues that have been argued in security holder class actions for some time. The Appeal Court judgment provides helpful guidance for boards on those issues.
The first issue was whether it is legitimate to apply the concept of market-based causation and if so, how to assess it.
The remitter judge accepted that market-based causation was appropriate to be applied, adopting the reasoning of Beach J in the Myer class action case. The Appeal Court agreed, and dismissed Worley’s contention that market based causation was not a valid means of determining causation in a securities class action.
The Appeal Court also concluded that Worley’s actions probably caused the plaintiff to suffer some loss or damage (greater than a mere possibility), explicitly basing that conclusion on the impact of Worley’s contravention rather than a counterfactual. The Appeal Court held that a counterfactual was only relevant to quantification of loss once the probability of some loss caused by the contravention had been established.[2]
“Nor is it necessary, in order to draw the conclusion at which we have arrived, to have regard to a specific or precise counterfactual disclosure. That is to say, the evidence sustains an inference that the price of WOR shares was higher by reason of the contraventions without needing to identify and isolate the precise contours of what a world without the contraventions in question would have looked like. The inference that those contraventions would have caused the price of WOR’s shares to be inflated to some extent at least is irresistible.” [3]
The second issue, having determined that Worley’s actions had caused loss, was the method for calculating loss.
The Appeal Court made a calculation based on a counterfactual as to guidance that would have been reasonably based if first given in August 2013, which the Appeal Court determined was $329.5 million (against original guidance of $352 million).
The calculation was based on a linear analysis agreed by the respective economic experts, assuming economic equivalence in a qualitative sense between the hypothetical guidance in August 2013 and the market impact of the actual revised guidance given in November 2013, using a constant percentage method.
Lessons for boards from the Worley causation decision
This is a case in which the court found that the company did not have a reasonable basis for guidance when given initially, as well as a failure to update guidance.
Boards should ensure that there are reasonable grounds for profit guidance when it is given, and in that regard, it would be prudent to base guidance on a P50 budget, not a more aspirational budget.
Boards should also be cognisant that market-based causation – applying an event-based linear analysis of movements in the market price - is now settled as an appropriate basis to decide whether the conduct of the entity has caused loss to security holders. Expect security holder class actions to continue to follow material movements in market price after an event related to the conduct of the company, whether or not concerning guidance.
Worley, at [99]
Worley, at [362]
Worley, at [377]
