SUMMARY

In accordance with the practice of the Federal Court in cases of public interest, importance or complexity, the following summary has been prepared to accompany the orders made today. This summary is intended to assist in understanding the outcome of this proceeding and is not a complete statement of the conclusions reached by the Court. The only authoritative statement of the Court’s reasons is that contained in the published reasons for judgment which will be available on the internet at www.fedcourt.gov.au together with this summary.

In this proceeding, the Australian Securities and Investments Commission (ASIC) alleged that the Australia and New Zealand Banking Group Limited (ANZ) contravened its continuous disclosure obligation under the Corporations Act 2001 (Cth).

In brief, s 674 of the Corporations Act imposes an obligation on listed companies to notify the market operator (the ASX) if the company has information that: (a) is not generally available; and (b) is information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of the company’s securities.

On Thursday, 6 August 2015, ANZ undertook a fully underwritten institutional share placement to raise $2.5 billion. The placement was underwritten by three investment banks: Citigroup Global Markets Australia Pty Ltd (Citi), Deutsche Bank AG (Deutsche) and JP Morgan Australia Ltd (JPM), which are referred to in the judgment as the Underwriters or the Joint Lead Managers.

ANZ’s shares were placed in a trading halt at 8.38 am on 6 August. The placement was announced to the market at 8.44 am. The Joint Lead Managers carried out a book-build process through the course of that day. They kept ANZ informed of progress from time to time during the day.

At 8.35 pm on 6 August, the Joint Lead Managers emailed a draft allocation list to ANZ. Although this showed that the book was covered to 103%, it proposed that approximately $754 million of the shares not be allocated to investors. These shares would therefore need to be taken up by the Underwriters. ANZ approved the proposed allocation. Subsequently, the amount to be taken up by the Underwriters was increased to approximately $790 million of the shares (approximately 31% of the placement).

At 7.30 am on Friday, 7 August 2015, ANZ announced that it had completed the placement and had raised $2.5 billion in new equity capital. ANZ did not disclose, in the announcement or at any time before the recommencement of trading in ANZ shares on 7 August, that the Underwriters were to take up between approximately $754 million and $790 million of the placement shares. Nor did ANZ disclose that the Underwriters were to take up a significant proportion of the placement shares. Trading in ANZ shares resumed at 10.00 am on 7 August 2015.

In the proceeding, ASIC contended that ANZ breached its continuous disclosure obligation by not disclosing to the market (either on the night of 6 August or before the recommencement of trading in ANZ shares on 7 August), either (a) that the Underwriters were to acquire between approximately $754 million and $790 million of the shares; or (b) that the Underwriters were to acquire a significant proportion of the shares.

ASIC contended that the information it identified was both: not generally available; and material information within the meaning of the legislation.

ANZ denied the allegation that the information was not generally available. ANZ also disputed ASIC’s allegation that the information was material within the meaning of the legislation. ANZ also contended that, for the purposes of assessing materiality, it was necessary to have regard to a broader suite of contextual information and, when one did so, the information lacked materiality.

In the reasons for judgment published today, the Court has concluded that ANZ breached its continuous disclosure obligation by not disclosing the information identified by ASIC either on the night of 6 August 2015 or before the recommencement of trading in ANZ shares on 7 August 2015.

In relation to the issue whether the information identified by ASIC was not generally available, the Court heard expert evidence called by each party. ANZ submitted that the information was generally available because it could be deduced, concluded or inferred from readily observable matter and publicly available information. The Court has concluded that the information was not generally available at the relevant times (see [416]-[427]). The Court’s reasons include that the factual evidence stands strongly against the proposition that, shortly before (or at) the recommencement of trading in ANZ shares on 7 August 2015, it could be deduced, concluded or inferred on the basis of information that was readily observable or publicly disseminated that the Underwriters were to take up a significant proportion of the placement shares.

In relation to the issue whether the information identified by ASIC was material for the purposes of the relevant provisions, the legislation provides that information is material for the purposes of the provisions if the information “would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of” the relevant securities.

ASIC contended that the information it identified was material because, if the information had been disclosed, persons who commonly invest in securities would have held an expectation that the Underwriters would promptly dispose of allocated or acquired placement shares, and in so doing place downward pressure on ANZ’s share price. ANZ disputed this proposition. The Court has concluded that ASIC’s contention should be accepted, having regard to the expert and factual evidence. The Court has concluded that the information was material for the purposes of the provisions (see [436]-[447]).

In relation to ANZ’s argument that it is necessary to have regard to a broader suite of information for the purposes of assessing materiality, the Court has considered each of the facts and matters put forward by ANZ. The Court has concluded that some of the matters relied on by ANZ do not fully or accurately reflect the facts, and other matters do not meaningfully affect the assessment of materiality (see [455]-[463]).

The proceeding will be listed for a hearing on penalty on a date to be fixed.

MOSHINSKY J

13 OCTOBER 2023