Brambles Limited, a successful Australian-listed multinational corporation, was the subject of a security-holder class action relating to guidance given in August 2016 concerning its financial performance in the 2017 financial year.
The trial was heard in the Federal Court in September and October 2022, and judgment was delivered on 10 April 2026. The judgment is 1,256 pages long.[1]
Brambles gave guidance at the time of the release of its FY2016 financial results on 18 August 2016 with respect to 2 metrics for FY2017: Underlying profit and sales revenue, and 3 “targets” for FY2019: underlying profit, sales revenue and a target 20% “return on capital invested” (ROCI).
The FY2017 guidance was withdrawn on 23 January 2017 on the basis that it could not be achieved, and the FY2019 targets were withdrawn on 20 February 2017. A significant drop in the Brambles share price of more than 15% followed the 23 January announcement and a further fall followed the 20 February announcement.
This Client Alert focuses on the findings with respect to the FY2017 profit and sales revenue guidance. The court dismissed the plaintiffs’ allegations with respect to the FY2019 targets.
The plaintiffs alleged that the FY2017 guidance did not have reasonable grounds at the time it was given, nor when reiterated at various times after it was given but before it was withdrawn, and accordingly that it was misleading in breach of the Corporations Act, the ASIC Act and the Australian Consumer Law. The plaintiffs also alleged that Brambles had breached its continuous disclosure obligations.
The court found that Brambles had reasonable grounds for giving the FY2017 guidance in August 2016 and when guidance was reiterated in October 2016.
However, the court found that the underlying profit guidance had ceased to have reasonable grounds when reiterated at the November 2016 Annual General Meeting, and that by and from 21 December 2016 until 23 January 2017, as a result of receipt of further information concerning financial performance of the CHEP US pallets division, Brambles no longer had reasonable grounds for both the underlying profit guidance and the sales revenue guidance.
Accordingly, the court found that the reiteration of guidance and the failure to amend or withdraw guidance from the relevant dates was misleading and in breach of continuous disclosure obligations.
Points to note
This judgment is based on extremely detailed factual evidence concerning internal financial information available to Brambles at various times in the period from August 2016 to January 2017, and the implications and interpretation of that information in relation to guidance.
The management of disclosure of a growing discrepancy to guidance or consensus is challenging and there are recent examples where the court found that the issue had been managed effectively, including the Iluka class action case (Bonham atf Auchum Super Fund v Iluka Resources Limited [2022] FCA 71).
The findings on misleading conduct and continuous disclosure breaches in this case are notable for their departure from what many listed companies and advisers would regard as accepted practice.
Variance from guidance
The variance from underlying profit guidance at the time of Brambles’ November 2016 AGM was assessed by the court as less than 5%. The court found that Group underlying profit for FY2017 was likely to be $32.6m (or $22.6m with contingency) under the bottom of the underlying profit guidance range of $1,055m to $1,075m. This represents about 3.1% below the bottom of the guidance range, and 4% below the midpoint (or 2.5% and 3.5% respectively with contingency).
ASX Guidance Note 8 would not suggest that such a variation to guidance, well below 5%, should ordinarily be disclosed. The court in other cases (TPT Patrol v Myer Holdings [2019] FCA 1747; ASIC v Nuix Limited [2026] FCA 490) has indicated that a reasonable person would not ordinarily expect a listed company to make a disclosure. Yet in Brambles, the court found that the failure to disclose the relatively small “miss” on profit guidance as at November 2016 was material, and a failure to disclose was misleading and a breach of continuous disclosure obligations. Whilst the court acknowledged the established metrics in GN8, it emphasised that these are only recommendations for how to assess materiality and that a disclosing entity needs to turn its mind to the question of whether a deviation from guidance could reasonably be material even if it is below the 5% threshold.
In the specific circumstances of this case the court found that Brambles should have anticipated that the market would consider even a narrow miss of the guidance as material for the share price. Of course, that is an easy thing for a court to find when the share price actually did drop by more than 15% following the withdrawal of the guidance. At pains not to refer to this as hindsight, the court calls it a “cross-check” of the ex ante materiality of the information - a distinction that could fairly be described as not necessarily intuitive.
As at 21 December 2016, the court found that expected FY2017 sales revenue was $64m below budget and the midpoint of guidance – about 1% variance and only 0.24% below the lower end of sales revenue guidance. The court also found that expected FY2017 underlying profit was likely to be $23m under the bottom of the guidance range and $31m below the midpoint – a better position than as at the November AGM and materially under 5% variance. The court found that the failure to amend or withdraw FY2017 guidance as to both sales revenue and underlying profit as at 21 December 2016 amounted to misleading conduct and a breach of the continuous disclosure obligations.
A similar position was found in January 2017 after receipt of December management reports but before the decision to withdraw guidance on 23 January, with similar consequences.
This decision, if it stands, may cause listed companies to be more conservative about updating the market concerning guidance, and may discourage even more listed companies from giving guidance. It is important to keep in mind however, that the circumstances of this case were very specific and that the court determined that there was evidence of internal communications that in the court’s view indicated that Brambles executives were concerned that even a narrow miss of the guidance may be received adversely by the market.
Rather than jump to the conclusion that all minor deviations must be disclosed as a result of this decision, disclosing entities who are grappling with this issue in their continuous disclosure decisions should consider whether in each case there are reasons to assume that reasonable investors would consider the “miss” to be material to the share price.
Officers
Determining who is an “officer” in these cases is important because the company is deemed to be aware of information that officers know or should have known. An “officer” is (relevantly) defined to include a person who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation”. The court applied the definition of officer broadly in this case, not limited to key management personnel (KMP) or Executive Leadership Team (ELT) members. The largest business unit in Brambles is CHEP Global, then representing about 78% of group revenue. The largest division of CHEP Global is CHEP North America, then representing about 39% of group revenue, where the performance issues were most acute at the relevant times. Contrary to Brambles submissions, its “officers” were found to include the President of CHEP North America, the CFO of CHEP Global, and the Senior Vice President Supply Chain of CHEP Global. None of these individuals were KMP or ELT members.
This finding, if it stands, will cause companies to review who they consider to be officers, with consequences for the application of their continuous disclosure policies.
Disclaimers
Brambles argued that guidance was qualified or neutralised by disclaimers concerning forward-looking statements. The court did not accept those arguments. In particular, the court found that the disclaimers concerning forward-looking statements were generic, located at the back of documents far removed from the relevant representations, and presented in smaller fonts.
We recommend that disclaimers appear at the front of documents in which forward-looking statements are made, that they are presented with headings in reasonable sized fonts, and that they are tailored to the relevant subject matter of the forward-looking statements.
Minutes
This was an unusual case in which, for very particular reasons based on the evidence, parts of the minutes of a board meeting were found not to be reliable evidence of what occurred at the meeting, effectively overriding the presumption in section 251A(6).
Southernwood v Brambles Limited (No 3) [2026] FCA 418
