November 2022: Worley – back to the beginning

Last month, the High Court refused a special leave application brought by Worley Limited (Worley) in relation to the Full Federal Court's decision in March 2022 (Crowley v Worley Limited [2022] FCAFC 33) (the Worley Appeal).?

As readers will recall, Mr Crowley alleged that Worley breached its continuous disclosure obligations and engaged in misleading or deceptive conduct when it released its FY14 earnings guidance in August 2013, and that he and other group members suffered loss when Worley's share price declined 26% after revising its FY14 earnings guidance in November 2013.?Justice Gleeson, at first instance, found in favour of Worley.?On appeal, the Full Court overturned Justice Gleeson's decision and remitted the class action back to a single judge of the Federal Court.?

Worley filed a special leave application to appeal to the High Court, arguing that the Full Court's findings in relation to "awareness" and what constituted reasonable grounds was in direct tension with intermediate appellate Court authorities and created significant uncertainty for companies because it would be an "absurd consequence" if, notwithstanding that a company's Board had formed and disclosed an opinion, the views of other persons within the company who (unknown to the Board) disagreed with, or knew more than the Board, must be disclosed.?In the absence of direct guidance from the High Court on these issues, Worley considered that an appeal was merited.

Worley's main argument was that the "universe of facts" available to a decision maker can only be made up of matters that existed, were actually before the decision?maker and taken into account by the decision?maker.?Since Worley's Board was not aware of any matter in that "universe" which would have contradicted their decision, Worley did not breach the law. The High Court tested Worley's arguments and queried whether the real question was who within the company had the relevant knowledge, and whether that relevant knowledge ought to have been known, and should have been considered, by the Board.

In response, Mr Crowley submitted among other things that the special leave application was premature.?This was because the decision in the Worley Appeal was not in favour of Mr Crowley, but that the trial judge’s fact?finding process had miscarried and the matter had to be remitted so that the exercise could be redone.?If Worley's questions remained live after this process, they could be reconsidered then. ?The High Court preferred Mr Crowley's submissions and refused special leave to appeal.?

The High Court's decision means that the findings made, and the guidance provided, by the Full Federal Court in the Worley Appeal continue to stand. ?We previously outlined the key takeaways from the Worley Appeal in our initial post on 31 March 2022, and what it meant for directors and officers of listed companies.?In summary, a company is "aware" of information (in the form of an opinion) when it ought to have – objectively – reasonably formed such an opinion based on the facts known to it.?The knowledge of a company's officers, including its CFO, is directly relevant in assessing a company's awareness as their knowledge is attributable to the company's knowledge under the ordinary principles of agency.?Care should continue to be taken by directors and officers when making any public facing statements and conducting post-event reviews.?Please see our post on 31 March 2022 for a more comprehensive discussion of the issues.

We will continue to follow any new developments.?For further queries or information relating to recent developments in class actions more generally, please contact us.