Market-Based Causation Arguable In Australian Shareholder Class Actions

Key Points

• Shareholder class actions in Australia typically bring statutory claims that require causation to be demonstrated. There has been an ongoing debate in relation to how causation may be proved. The debate has centred on whether direct reliance is required or some other form of causal link, such as indirect reliance, is permitted.
• Indirect reliance is a form of causation where contraventions of statutory prohibitions or requirements are alleged to cause the share market, as a whole, to inflate the price of a company's securities so that group members suffer losses when they acquire shares at the inflated price.
• The Full Federal Court of Australia has found that indirect reliance in the form of market-based causation may be pleaded to satisfy the causation requirements for the statutory claims relied on by shareholders in class actions.