Market-based causation – the Myer securities class action

The Myer case is a landmark case for two reasons. First, it is the first Australian securities class action to proceed to judgement. Second, the Federal Court of Australia has accepted 'market-based causation', which has long been debated in Australia. The decision increases the risk of shareholder class actions for publicly listed companies, as, if market-based causation is accepted, plaintiffs will no longer need to establish individual reliance when pursuing a company for breaching its obligations of continuous disclosure. Ironically, market-based causation also assisted Myer in winning this case, as we will explain.

The difficulty in proving reliance has historically been a significant hurdle for plaintiffs to overcome, particularly in a class action. For example, how can a class of shareholders be proven to have read and relied on a particular market release containing the relevant representation in forming their decisions to trade?