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SHAREHOLDER CLASS ACTIONS IN AUSTRALIA: UNCERTAINTY FOR THE FUTURE OF MARKET-BASED CAUSATION

SHAREHOLDER CLASS ACTIONS IN AUSTRALIA: UNCERTAINTY FOR THE FUTURE OF MARKET-BASED CAUSATION

The following article was contributed by Nikki Stever and Madison Smith of Australia-based commercial law firm, Piper Alderman. In the third decision delivered in a shareholder class action in Australia,[1] Iluka Resources Limited (ASX: ILU), (Iluka) succeeded in its defence of a lawsuit[2] which failed to prove that the shareholders’ direct reliance on Iluka’s conduct caused their losses. However, the decision in favour of Iluka notably lacked any significant consideration of the second causation argument typically pleaded in shareholder class actions – market-based causation. Background of the matter Iluka is a large mining company and global supplier of mineral sand products. On 9 July 2012, Iluka revised its sales guidance for its products, resulting in a 25% drop in share price. The shareholders alleged that Iluka’s sales guidance leading up to its announcement:
  1. was misleading or deceptive; and
  2. breached their continuous disclosure obligations.
The lead applicant purported that reliance on the sales guidance impacted their decision to purchase shares in the company (direct reliance).  It is not clear to the authors if the lead applicant or shareholders pleaded that the market as a whole was impacted by the sales guidance (market-based causation). The Federal Court of Australia (FCA) rejected both claims on the basis that the representations alleged were not actually made, and were merely statements/guidance about Iluka’s expectations and were not guarantees or predictions/forecasts of future performance. The FCA also found that the lead applicant relied on various external stock reports rather than statements made by Iluka, causing the direct reliance case to fail. Direct reliance and market-based causation Direct reliance in a shareholder class action requires the claimant to prove they actually relied on the contravening conduct (i.e. statements) when deciding to acquire shares in the defendant company, and that the subsequent decrease in share price was directly related to the contravening conduct, resulting in loss to the shareholder. Market-based causation is based on establishing that the price that the defendant’s shares traded on the market was inflated by the contravening conduct, such that the claimant prima facie suffered loss by paying an increased price for the shares. The Court has accepted this proposition,[3] however, also suggested that it may still be necessary for individual shareholders to give evidence that, but for the contravention by an entity, they would not have purchased the shares (or not at the price paid) in order to establish loss.[4] Causation and loss in Iluka Because the Court found that no representations were made (and therefore they were not capable of being relied upon, either directly or by the market), the judgment was relatively quiet in relation to causation. While there is reference to the failed direct reliance case, in so far as it was held that the lead applicant did not rely on the sales guidance issued by Iluka when deciding to purchase the shares, unusually the judgment is completely silent on market-based causation. In previous cases where market-based causation has been alleged by the plaintiff, the but for test has been discussed by the FCA in the context of considering misleading or deceptive conduct claims.  For example, the alleged contraventions in Myer and Re HIH were assessed by considering whether the alleged loss would not have occurred but for the contraventions.[5] The High Court in Australia has offered an alternative approach in cases of proving factual causation of misleading and deceptive conduct generally – the ‘a factor’ test.[6] The a factor test is satisfied if the misleading or deceptive conduct was a factor in the occurrence of the plaintiff’s loss, or in other words materially contributed to the plaintiff’s loss. In Iluka, this test for market-based causation would be satisfied if the alleged contraventions materially contributed to the shareholders’ loss, rather than the more stringent test of whether the contraventions were necessary for the loss. The a factor test, if adopted, arguably offers a more appropriate test for market-based causation in cases of misleading or deceptive conduct. Firstly, it is more reliable and intuitive.[7] For example, the but for test requires counterfactual speculation as to how a market would have responded but for a particular event. This can be a difficult exercise for a plaintiff to speculate and quantify the loss. The a factor test shifts the requirements from necessity to contribution and is not as easily defeated by a claim that it was not the only factor relevant to the plaintiff’s loss. Secondly, the test also avoids duplicative causation, as market-based causation often involves multiple factors that could have affected share prices.[8] The court does not need to assess each separate factor and consider its relative relevance to the causal loss overall, as is required when assessing the causal conduct following the but for test. Finally, the a factor test promotes the deterrence of all misleading or deceptive conduct by providing a broad opportunity for the conduct to be considered misleading or deceptive, regardless of whether it was necessary for the loss.[9] Conclusion By failing to address market-based causation, the Iluka decision has created uncertainty around what causal test the court would be willing to accept for shareholders to succeed with a market-based causation claim. It is only a matter of time before there is a substantial decision on this point, however, until this occurs, the law on market-based causation remains unsettled. About the Authors Nikki Stever, Special Counsel  — Nikki specialises in complex litigation and disputes, with an emphasis on class actions and disputes involving corporations, competition and consumer legislation and disputes concerning breaches of trust and fiduciary duties. Nikki frequently works with litigation funders and is experienced in the structuring and conduct of funded litigation, across all Australian jurisdictions. Madison Smith, Lawyer  — Madison is a litigation and dispute resolution lawyer at Piper Alderman with a primary focus on corporate and commercial disputes. Madison is involved in a number of large, complex matters in jurisdictions across Australia. For queries or comments in relation to this article please contact Kat Gieras, Litigation Group Project Coordinator | T: +61 7 3220 7765 | E:  kgieras@piperalderman.com.au — [1] Following Crowley v Worley Limited [2020] FCA 1522 and TPT Patrol Pty Ltd as trustee for Amies Superannuation Fund v Myer Holdings Ltd [2019] FCA 1747. [2] Bonham v Iluka Resources Ltd [2022] FCA 71. [3] In the matter of HIH Insurance Limited (In Liquidation) [2016] NSWSC 482; TPT Patrol Pty Ltd as trustee for Amies Superannuation Fund v Myer Holdings Ltd [2019] FCA 1747. [4] TPT Patrol Pty Ltd as trustee for Amies Superannuation Fund v Myer Holdings Ltd [2019] FCA 1747, [1671]. [5] In the matter of HIH Insurance Limited (In Liquidation) [2016] NSWSC 482; TPT Patrol Pty Ltd as trustee for Amies Superannuation Fund v Myer Holdings Ltd [2019] FCA 1747. [6] Henville v Walker [2001] HCA 52, [61] and [106]. [7] Henry Cooney, Factual causation in cases of market-based causation (2021) 27 Torts Law Journal 51. [8] Ibid. [9] Ibid.
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Group & Collective Action Market Positioned for Growth Following UK Reforms

By John Freund |

The latest chapter of the Global Legal Group’s Class and Group Actions Laws & Regulations 2026 report titled “In Case of Any Doubt – The Group and Collective Action Market is Here to Stay” provides a clear signal: the group and collective litigation landscape across the UK and Europe is evolving, and legal funders should take notice.

An article in ICLG highlights several key moves in the UK: the Civil Justice Council (CJC) issued its final report in June 2025 on private litigation funding, recommending “light‑touch” regulation of third‑party litigation funding and reiterating support for funding as a tool of access to justice. It follows the PACCAR Ltd v Green & others decision by the United Kingdom Supreme Court, which classified certain litigation funding agreements as damages‑based agreements (DBAs), raising regulatory scrutiny on opt‑out collective proceedings before the Competition Appeal Tribunal. The CJC recommends reversing that classification via legislation, permitting DBAs in opt‑out class actions, and regulating funders’ capital and AML compliance.

Meanwhile, the UK’s opt‑out collective action model under competition law is under review. The government’s call for evidence flagged the high costs and shifting case mix as areas of concern.

On the European front, the Representative Actions Directive has spurred changes in France and Germany. France’s new law allows third‑party funding of group actions and broadens access and scope. Germany’s implementation enables qualified consumer associations to bring collective redress for both injunctive and monetary relief across a wide range of sectors including ESG, data‑protection and tort.

For legal funders, these developments signal both opportunity and risk. On one hand, enhanced regulatory clarity and expanded access points strengthen the business case for collective‑action funding. On the other, increasing scrutiny over funding arrangements, roles of funders, and capital adequacy impose compliance burdens.

Sen. Tillis Vows Second Round in Litigation‑Finance Tax Battle

By John Freund |

Sen. Thom Tillis (R–N.C.) said he’s not backing down in his push to impose a special tax on litigation‑finance investors, signalling a new legislative attempt after an initial setback.

According to a report in Bloomberg Law, Tillis introduced the Tackling Predatory Litigation Funding Act earlier this year, which would levy a 41 % tax on profits earned by third‑party funders of civil lawsuits (37 % top individual rate plus 3.8 % net investment income tax). While the bill was included in the Senate Republicans’ version of the tax reconciliation package, the tax provision was ultimately removed by the Senate parliamentarian during the June process.

Tillis argues this is about fairness: he says that litigation‑finance investors enjoy more favourable tax treatment than the victims who receive legal awards, a situation he calls “silly.” He acknowledged the industry’s strong push‑back, noting a high level of lobbying from entities such as the International Legal Finance Association and other funders. “You couldn’t throw a rock and not hit a contract lobbyist who hadn’t been engaged to fight this … equitable tax treatment bill,” he said.

Though Tillis is not seeking re‑election and will leave office next year, he remains committed to using his remaining time to keep the tax issue alive. His remarks suggest this debate is far from over and could resurface in future legislation.

Hausfeld Secures Landmark £1.5bn Victory Against Apple

Hausfeld has achieved a major breakthrough in the UK’s collective‑action landscape by securing a trial victory against Apple Inc. in a case seeking up to £1.5 billion in damages. The case, brought on behalf of roughly 36 million iPhone and iPad users, challenged Apple’s App Store fees and policies under the UK collective action regime.

According to the article in The Global Legal Post, the action was filed by Dr Rachael Kent (King’s College London) and backed by litigation funder Vannin Capital. Over a 10‑year span, the tribunal found that Apple abused its dominant position by imposing “exclusionary practices” and charging “excessive and unfair” fees on app purchases and in‑app subscriptions.

The judgement, delivered by the ­Competition Appeal Tribunal (CAT) on 23 October 2025, marks the first collective action under the UK regime to reach a successful trial‐level resolution. The CAT held that Apple’s 30 % fee on these transactions breached UK and EU competition laws and that the restrictions were disproportionate and unnecessary in delivering claimed benefits.

Apple has stated it will appeal the ruling, arguing the decision takes a “flawed view of the thriving and competitive app economy.” Meanwhile, the result is viewed as a significant vindication for collective claimants, with Dr Kent describing it as “a landmark victory … for anyone who has ever felt powerless against a global tech giant.”