Logistics giant Brambles (ASX:BXB) is bracing for a potential compensation bill exceeding $100 million following a landmark Federal Court ruling that found the company misled investors over its 2016-17 financial forecasts.
In a 1,233-page judgement delivered more than three years after the initial class action trial, Justice Bernard Murphy ruled that the pallet supplier engaged in deceptive conduct and breached continuous disclosure obligations by issuing profit guidance without "reasonable grounds".
The court found that senior management, led by former chief executive Tom Gorman, had "unwisely set" optimistic targets to optimise the share price.
The strategy backfired in January 2017 when Brambles slashed its outlook due to flagging US demand, triggering a 16% share price collapse that wiped $3.1 billion off its market value in a single day.
The judgement marks a historic turning point in Australian corporate law, representing the first time plaintiffs have secured a trial victory in a shareholder class action, following the dismissal of previous high-profile cases against Myer and the Commonwealth Bank.
Rebecca Gilsenan, head of class actions at Maurice Blackburn, hailed the decision as a vital win for market integrity.
While Brambles acknowledged the ruling and noted it maintains insurance arrangements, a spokesperson labelled current damage estimates "purely speculative" as the company reviews its grounds for appeal.
Justice Murphy defended the length of his judgement, citing the exhaustive nature of the 2,600 documents tendered.
The parties now face a complex process to determine the final quantum of damages for affected shareholders.