Victory for shareholders as principle of market-based causation upheld in HIH Insurance Ltd

In brief - HIH's conduct misled the market and inflated the share price

By releasing overstated operating profit in its financial results, HIH led the market to believe that it was trading more profitably and had greater net assets than was the case. This artificially inflated the price of HIH shares. Investors who bought shares suffered a loss because they paid the inflated price for the shares they would have acquired in any event.

Court finds that plaintiffs purchased shares at an inflated price

On 20 April 2016, Justice Brereton of the Supreme Court of NSW handed down judgment in four actions against the liquidators of HIH Insurance Ltd (Smith & Ors v McGrath (in his capacity as Liquidator of HIH Insurance Ltd); Baldock & Ors v McGrath (in his capacity as Liquidator of HIH Insurance Ltd); De Bortoli Wines (Superannuation) Pty Ltd & Ors v McGrath (in his capacity as Liquidator of HIH Insurance Ltd); and Cuong Ly [2016] NSWSC 428).