FEDERAL COURT OF AUSTRALIA

R&B Investments Pty Ltd (Trustee) v Blue Sky Alternative Investments Limited (in liq) (Separation of Issues) [2025] FCA 1097

ORDERS

THE COURT ORDERS THAT:

Initial Trial Date

1.    The hearing set down from 3 August 2026 (initial trial) be vacated.

2.    The applicants are to pay the costs thrown away by reason of the initial trial being vacated.

Applicants’ Pleadings

3.    By 5 December 2025, the applicants are to serve on the respondents:

(a)    any proposed amended pleading; and

(b)    any affidavit evidence they intend to rely on in support of an application for leave to amend their pleadings with such evidence addressing the extent to which the applicants’ review of the non-party discovery informs any proposed amendments to the pleading.

Opt Out Notice

4.    By 5 December 2025, the applicants are to serve on the respondents proposed orders for the opt out and any registration process, including a draft notice to group members.

5.    Within 7 days of service of the materials required by Order 4, the respondents are to notify the applicants of any proposed amendments to those materials.

6.    By 5pm on Friday 12 December 2025, the parties are to provide to the Associate to Justice Lee:

(a)    an agreed document prepared in accordance with Orders 4 and 5 above; or

(b)    in the event that agreement is not reached as to the contents of the document to be prepared in accordance with Orders 4 and 5 above – their proposed version.

Expert Questions

7.    By 5 December 2025, the applicants are to serve on the respondents:

(a)    separate lists of expert questions they propose be the subject of opinion evidence in the proceeding, based on:

(i)    the current pleading; and

(ii)    any proposed amended pleading; and

(b)    separate lists of the documents they propose be included in the brief to the expert or referee in each discipline, based on:

(i)    the current pleading; and

(ii)    any proposed amended pleading.

8.    Between 8 and 12 December 2025, a conferral take place between the parties in person to be attended by at least one counsel briefed in the matter for each party to attempt to agree on and produce a document identifying, with precision, the expert questions that will be the subject of opinion evidence in the proceeding, based on:

(a)    the current pleading; and

(b)    any proposed amended pleading.

9.    By 5pm on 12 December 2025, the parties are to provide to the Associate to Justice Lee:

(a)    an agreed document prepared in accordance with Order 8 above, and the lists of documents proposed to be included in the brief to each expert or referee referred to in Order 7(b) above; or

(b)    in the event that agreement is not reached as to the contents of the document to be prepared in accordance with Order 8 above – their proposed version.

Expert Evidence

10.    By 12 December 2025, for each field of expertise contemplated by the expert questions document to be prepared in accordance with Orders 8 and 9 above each party is to nominate the identity of any:

(a)    expert proposed to be retained; or

(b)    referee proposed to be appointed.

Further case management

11.    The proceeding be listed for a case management hearing at 9:30am on 15 December 2025 (Next CMH).

12.    By not later than:

(a)    7 days prior to the Next CMH the applicants deliver to each other party a draft joint position paper (JPP) succinctly summarising their position in respect of each issue they propose be addressed at the Next CMH.

(b)    5 days prior to the Next CMH, each other party deliver to all parties its contribution to the draft JPP, succinctly summarising that party’s position in respect of each issue it proposes be addressed at the Next CMH; and

(c)    3 days prior to the Next CMH the applicants deliver to the Associate to the docket judge a consolidated JPP identifying the issues proposed for discussion and the positions of each party in respect of each issue.

Security for costs

13.    Order 13 of the orders made on 21 July 2025 be vacated.

14.    The parties are to confer in relation to security with a view to seeking agreement on or by 12 December 2025.

15.    Any dispute in relation to security for costs that remains unresolved after the period of conferral provided in Order 13 be determined by Justice Lee at the Next CMH.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from the transcript)

LEE J:

A    INTRODUCTION

1    In BMW Australia Ltd v Brewster [2019] HCA 45; (2019) 269 CLR 574 (at 616–617 [102]), Gageler J referred to the story of the Federal Court adapting its procedures in relation to funded class actions as one of adoption, testing, evaluation and modification of a range of innovative procedures, all occurring within the pre-existing structure of Part IVA of the Federal Court of Australia Act 1976 (Cth) (FCA Act). In doing so, his Honour referred to remarks made in Perera v GetSwift [2018] FCA 732; (2018) 263 FCR 1 (at 9–15 [10]–[29]).

2    In that judgment, I explained that securities class actions have developed in a common form and have come to have a familiar genesis and development.

3    This involves a significant drop in the value of securities being scrutinised to determine whether it is likely that the relevant drop had been occasioned by the late revelation of material information, premised on assumptions that: (a) the value of the relevant security reflects the expected discount value of future cash flows to the security holders; and (b) that the security operates in an efficient market. The information released prior to the price drop is then reviewed to ascertain whether it was likely to have caused the market to alter the expectation of future cash flows (hence, causing the repricing of the securities to reflect these altered expectations). Preliminary analysis then takes place to ascertain whether there is sufficient basis for assuming the existence of contravening conduct during a period anterior to the revelation, and this usually involves close considerations of any relevant disclosures, and sometimes available analyst reports. Further analysis is then undertaken as to the size of the potential loss that may be related to the suspected contravening conduct, over an identified period, the duration of which is identified by the preceding analysis.

4    If all the relevant boxes are ticked, the bugle then sounds.

5    But another common feature of securities class actions, to adapt an analogy I recently used in another case (taken from the First Letter of St Paul to the Corinthians), is that one begins such a case by looking through a glass darkly: that is, there is almost always an asymmetry of understanding between the applicant and those instructing the respondent as to what was occurring within the company suspected as having engaged in contravening conduct.

6    This leads to a progressive revelation of information during the case which, in turn, has led to a familiar routine, whereby securities class action applicants commence proceedings, and then commonly seek to amend following the information asymmetry being addressed (predominantly through the provision of document-based discovery by the respondent).

7    This matter has come before me today to deal with two issues. Both require an appreciation of what, at least to date, has been the usual characteristics and progression of class actions of the type described above. The first is whether there should be a separate identification of issues to be determined at an initial trial; and the second relates to an application that has emerged during argument this morning, being a contested application for the vacation of the present hearing date.

B    THE SEPARATION OF ISSUES

8    I explained in McNickle v Huntsman Chemical Company Australia Pty Ltd (Costs) [2024] FCA 883 (at [4]), the tendency throughout the history of Part IVA class actions:

... for practitioners to make automatic reference to established practice and procedure principles in ordinary inter partes litigation without any adaption to those principles informed by the different nature of class actions.

9    In that case, I entreated the parties to bifurcate the issue of causation arising from the statutory claims (that is, whether a product was carcinogenic) from a claim in negligence, so that the causation issue could be heard and determined in advance of the balance of the issues in the proceeding. This general factual causation issue was eventually determined adversely to the applicant, leading to a very substantial saving of legal costs and court time.

10    As is often the case when the Court proposes an unanticipated course to facilitate the efficient resolution of the dispute, the applicant forcefully opposed such a course and referred to several authorities concerning the need for caution in splitting issues for determination. Those principles, as is well known, urge the Court to tread warily in determining separate issues; but as I observed during oral argument, although these cautions are well understood, they have much less force in the context of Part IVA proceedings which, if experience is any guide, almost always involve a staged hearing between common issues (or issues of commonality) and individual issues. As I noted in McNickle (at [9]), what is evident about the class action procedure is that it “… already has built into it the bifurcation of issues”.

11    The real question in class actions is how all the issues should be bifurcated (or further split). The lodestar in making a practice and procedure determination of this type is the mandatory requirement to make orders which facilitate the just resolution of the disputes within the class action according to law; and as quickly, inexpensively and efficiently as possible: see Pt VB of the FCA Act and, in particular, s 37M(3).

12    There is no need, for the purposes of this judgment, to set out the details of the allegations made except in the most cursory of ways. In essence (and with oversimplification necessarily attendant upon broad summary), there are several ways by which essentially the same allegation is made. The nature of that broad allegation is, that there was conduct, either through positive representations or through other conduct, that was false or misleading, leading to an inflated market for the price of securities.

13    The relevant statutory norms said to be breached are the continuous disclosure provisions in s 674 of the Corporations Act 2001 (Cth) (CA), and two other norms within Part 7.10 of the CA relating to prohibited conduct relating to financial products and financial services, being s 1041E (the prohibition against false or misleading statements) and s 1041H (the prohibition against misleading and deceptive conduct). In relation to the same or overlapping conduct, the applicants also plead breaches of s 18 of the Competition and Consumer Act 2010 (Cth) Sch 2 and s 12DB of the Australian Securities and Investments Commission Act 2001 (Cth).

14    Each of these alleged contraventions are accompanied by an assertion that both the applicants and group members are persons who have suffered loss or damage by reason of the contravention of these norms. The same loss and damage is in issue, irrespective of the statutory norm which is said to have been the subject of non-compliance. Each of the CA provisions pleaded logically requires the Court to determine whether there has been contravening conduct prior turning to the logically subsequent issue as to the consequences said to flow from that contravening conduct.

15    As I recently said in Transport Workers’ Union Australia v Qantas Airways Ltd (Penalty) [2025] FCA 971 (at [309]), the various statutory formulations of a test for causation have a well-established meaning. The application of a “but for” test has an important role as a negative criterion (and it will usually exclude causation if not satisfied). However, “but for” is inadequate as a comprehensive positive test. It must be recalled that when a Court is considering a claim for recoverable loss, it is not merely engaged in the factual or historical exercise of explaining and calculating the financial consequence of a sequence of events of which the contravention forms part, rather, it is attributing legal responsibility: see I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109 (at 119 [26] per Gleeson CJ).

16    Given the relationship between the nature of the statutory causes of action with which we are presently concerned, it suffices for me to consider the issue of the splitting of issues through the prism of the claim that there has been a breach of the continuous disclosure laws.

17    The relevant law relating to the obligations of continuous disclosure are set out in very considerable detail in Australian Securities and Investments Commission v GetSwift Limited (Liability Hearing) [2021] FCA 1384 (at [1065]–[1104]).

18    The relevant material provision to this case is s 674 of the CA, which is in the following terms:

674 Continuous disclosure—listed disclosing entity bound by a disclosure requirement in market listing rules—reasonable person’s expectations

Obligation to disclose in accordance with listing rules

(1)    Subsection (2) applies to a listed disclosing entity if provisions of the listing rules of a listing market in relation to that entity require the entity to notify the market operator of information about specified events or matters as they arise for the purpose of the operator making that information available to participants in the market.

(2)    If:

(a)    this subsection applies to a listed disclosing entity; and

(b)    the entity has information that those provisions require the entity to notify to the market operator; and

(c)    the information is not generally available; and

(d)    a reasonable person would expect the information, if it were generally available, to have a material effect on the price or value of ED securities of the entity;

the entity must notify the market operator of that information in accordance with those provisions.

(3)    For the purposes of the application of subsection (2) to a listed disclosing entity that is an undertaking to which interests in a registered scheme relate, the obligation of the entity to notify the market operator of information is an obligation of the responsible entity.

(3A)     For the purposes of the application of subsection (2) to a listed disclosing entity that is an undertaking to which interests in a notified foreign passport fund relate, the obligation of the entity to notify the market operator of information is an obligation of the operator of the fund.

(4)    Nothing in subsection (2) is intended to affect or limit the situations in which action can be taken (otherwise than by way of a prosecution for an offence based on subsection (2)) in respect of a failure to comply with provisions referred to in subsection (1).

Obligation to make provisions of listing rules available

(5)    If the listing rules of a listing market in relation to a listed disclosing entity contain provisions of a kind referred to in subsection (1), the market operator must ensure that those provisions are available, on reasonable terms, to:

(a)    the entity; or

(b)    if the entity is an undertaking to which interests in a registered scheme relate—the undertaking’s responsible entity; or

(c)    if the entity is an undertaking to which interests in a notified foreign passport fund relate—the operator of the fund.

(Notes omitted)

19    Listing Rule 3.1 relevantly provided as follows:

Once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities, the entity must immediately tell the ASX that information.

(Footnotes omitted)

20    It follows from the terms of Listing Rule 3.1 that, to establish a contravention of s 674(2) of the CA, the applicants are required to demonstrate facts which make out what can be conveniently described as four elements, or “requirements”:

(1)    there existed “information”;

(2)    the entity had that information and was aware of it;

(3)    the information was not “generally available”; and

(4)    a reasonable person would expect that information, if it were generally available, to have a “material effect” on the price or value of the entity’s shares.

21    To provide the necessary background to a proposed splitting of issues, it is worth dealing very briefly with each of these requirements. In Section H of my reasons in GetSwift (at [1065]–[1104]), I set out, in much more detail, the relevant law relating to obligations of continuous disclosure. Some of the summary below has been taken from part of that judgment and also my judgment (as part of the Full Court) in Australia and New Zealand Banking Group Ltd v Australian Securities and Investment Commission [2024] FCAFC 128; (2024) 305 FCR 383.

B.1    Information

22    The first requirement is that there must be something constituting “information”.

23    I set out the detail of that requirement in ANZ v ASIC (at 390–391 [30]–[33]). In that judgment, I additionally referred to the specificity of pleaded information and “context” (at 394–396 [54]–[67]). It suffices for present purposes to note that this analytical framework in which contextual information is being considered, was subject of agreement by the Full Court in Zonia Holdings Pty Ltd v Commonwealth Bank of Australia [2025] FCAFC 63 (at [361]–[364] per Murphy, Moshinsky and Button JJ) where it was noted that such information would usually be considered as part of the materiality analysis.

B.2    Awareness of information

24    The second requirement is that the entity has information. It must also be proven that the entity was “aware” of the information, in the sense that an officer of the entity has, or ought reasonably to have, come into possession of the information in the course of the performance of their duties as an officer.

25    Two defined terms used in Listing Rule 3.1 are important in understanding this requirement.

26    First, the definition of “aware” is defined by Listing Rule 19.12 in the following terms:

[A]n entity becomes aware of information if, and as soon as, an officer of the entity … has, or ought reasonably to have, come into possession of the information in the course of the performance of their duties as an officer of that entity.

27    Secondly, s 9 of the CA defines “officer” in the following terms (which applies to the Listing Rules pursuant to Listing Rule 19.3(a)):

officer of a corporation means:

(a)    a director or secretary of the corporation; or

(b)    a person:

(i)    who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

(ii)    who has the capacity to affect significantly the corporation’s financial standing; or

(iii)    in accordance with whose instructions or wishes the directors of the corporation are accustomed to act …

28    As can be seen, by reason of the definition of “aware”, s 674(2) operates by reference to the material information of which an officer of the entity has, or ought reasonably to have, come into possession. All such information amounts to information of which the entity is aware.

B.3    General availability of information

29    The third requirement is that the information must not be generally available. Sections 676(2) and (3) of the CA describe when information is taken to be generally available for the purposes of s 674:

676 When information is generally available

…

(2)    Information is generally available if:

(a)    it consists of readily observable matter; or

(b)    without limiting the generality of paragraph (a), both of the following subparagraphs apply:

(i)    it has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of a kind whose price or value might be affected by the information; and

(ii)    since it was so made known, a reasonable period for it to be disseminated among such persons has elapsed.

(3)    Information is also generally available if it consists of deductions, conclusions or inferences made or drawn from either or both of the following:

(a)    information referred to in paragraph (2)(a);

(b)    information made known as mentioned in subparagraph (2)(b)(i).

30    The phrase “readily observable matter” is not defined in the CA. The requirement is a question of fact to be determined on an objective and hypothetical basis. Information, of course, may be readily observable even if no one has observed it. The test of whether material is readily observable is not whether the matter was observed but whether it could have been observed readily, meaning easily or without difficulty.

B.4    Materiality

31    The fourth requirement is provided for by s 674(2)(c)(ii) of the CA.

32    For the purposes of s 674, s 677 relevantly provides that a reasonable person will be taken to expect information to have a “material effect” on the price or value of securities if that information “would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of” the securities.

33    Section 677 is a deeming provision, which describes a sufficient, but not a necessary foundation for establishing the materiality requirement under s 674(2)(c)(ii).

34    In Grant-Taylor v Babcock & Brown Ltd (in liq) [2015] FCA 149; (2015) 322 ALR 723, Perram J noted (at 737 [64]):

What s 677 poses is an objective test to be applied at the time it is alleged the disclosure should have occurred. This involves a survey of all of the available material including, because they are part of the factual matrix, the views of the company and individual investors while accepting, of course, that those views cannot by themselves be determinative [citations follow]. … Despite this ex ante approach, it is nevertheless permissible to examine how the market subsequently behaved when the information was disclosed as a device for confirming the correctness of a conclusion already reached.

(Citations omitted, emphasis added)

35    To satisfy the “materiality” requirement imposed by s 674(2)(c)(ii), the information must be “non-trivial” and rise beyond information which “may” or “might” influence a decision by investors and it must be shown that the information “would” or “would be likely” to influence a decision and the relevant “influence” is that which bears upon common investors.

36    Determining whether information (had it been generally available) would be expected by a reasonable person to have a material effect on the price or value of a company’s securities is a matter which can be addressed by expert evidence. Such evidence may aid the Court in determining the predictive exercise that the sections require. This is not to say that expert evidence will always (or even often) be useful. After all, the assessment of materiality upon an ex-ante approach involves a matter of judgment, informed by commercial common sense.

37    Evidence of the actual effect of the information disclosed on the share price might be relevant in determining whether s 674(2) of the CA has been contravened. As noted above, such evidence may, depending upon the circumstances, amount to a cross or reality “check” as to the reasonableness of an ex-ante judgment about a different hypothetical disclosure.

B.5    Separation of contravention and causation of loss

38    Explanation of this legal framework in a little detail is necessary because of a proposal that arose during the last case management hearing.

39    I proposed an initial trial that would stop after considering these four requirements of s 674 of the CA and not proceed further to determine the financial consequences of the sequence of events of which any contravention forms part. That is, to examine initially only the issue of contravention, leaving causation for later determination. In considering this course I recognised that, as is commonly the case in securities class actions, causation is put in a variety of ways, being an allegation that some group members relied on specific aspects of the contravening conduct to the more familiar market-based causation plea.

40    Such a course was opposed by the respondents. The matter was then adjourned to allow the parties to exchange detailed submissions going to the question of what issues should be determined at a “stage one” trial.

41    Before coming to how the applicants finally put their application, it is worth setting out what I had in mind, and why I thought it might be time to challenge the apparently invariable assumption made in securities class actions that causation of loss be dealt with at an initial trial, that is, at the same time as identifying whether contravening conduct occurred.

42    As noted above, materiality as a requirement for proving contravention under s 674 of the CA is necessarily a forward-looking issue. For the obligation for a company to disclose information to be engaged, there needs to be an assessment of a future hypothetical event. That is, what would be the actual or likely reaction of the market to the information of which the company is aware. Both at the Bar and as a judge, I think I can say I have had a long experience of thinking about materiality questions. When, as I noted above, the history of Part IVA has been one of exploration, revelation and adaption, it seems to me that those closely involved in securities class actions should not unthinkingly adopt procedures by way of reflex, but try to learn from the history of how these actions have been conducted over the course of the last generation and consider whether improvement or greater efficiency is possible (at least in some cases).

43    Seeking to draw together some of that experience, in Parkin v Boral Limited (Materiality Evidence Ruling) [2025] FCA 70 (at [9]), I said the following:

At least in my experience of dealing with materiality questions in cases of this sort, I have found expert evidence on materiality as being of very limited significance. It often amounts to voluminous and expensive material which over-intellectualises something which is supposed to be a matter of judgment assessed by reference to the realities of the business world and on an ex ante basis. Put another way, it is an evaluative assessment informed by commercial common sense. Despite this, applicants and litigation funders, for reasons not always readily apparent to me, think it is a good idea to spend vast amounts of money on experts to put such materials before the court and, perhaps understandably, in those circumstances, respondents feel they have no choice but to reply.

44    Time and again I have seen huge sums spent on opinions which are no more insightful than applied common sense. The vice is compounded in that so-called materiality expert evidence is often, at least in my experience, unrealistic in that it pays insufficient attention to the reality that when a company needs to make the materiality assessment, it is in the hurly-burly of real-time business decision-making.

45    Even in cases where the pleaded information is well defined and straightforward, and it is hard to conceive that anyone could dispute that if the information existed, it would be likely to have a material effect on the price or value of securities, such expert evidence is routinely filed. This is often in the form of opinion evidence by experienced investors, expressed at a relatively high level of generality, and also involves financial economists adopting quantitative linear regression techniques involving event studies, which are used to quantify the effects of the information on share price (and which have long been used in the United States securities fraud litigation, and were imported into securities class actions in this country at beginning of this century). This latter evidence is, of course, primarily directed to issues of qualification of the price effect of a non-disclosure (so-called “share inflation”).

46    The difference between the ex-ante assessment, which is the focus of analysis of contravention, and an ex-post analysis, which focuses on what would have happened in a counterfactual, is often elided.

47    There have, of course, been expressions in the cases that an ex-post analysis could, depending upon the circumstances, rationally affect, at least indirectly, the assessment of materiality by reason of the existence of share inflation, hence making the evidence relevant within the meaning of ss 55 and 56 of the Evidence Act 1995 (Cth). For example:

(1)    in Earglow Pty Ltd v Newcrest Mining Ltd [2015] FCA 328; (2015) 230 FCR 469 (at 488 [84(d)] per Beach J):

… As noted in Australian Securities and Investments Commission v Fortescue Metals Group Ltd (2011) 190 FCR 364 at [188], s 677 is not a “high threshold”. The terms of s 677 “do not invite any inquiry as to whether any change in the price of securities has occurred … caused by an announcement”. Nevertheless “[w]hat happened in the market, in terms of movements in share price, may assist the Court in applying the ‘likely influence’ test”; such an analysis is an ex post analysis, albeit that the expectation issue is an ex ante one (see also at first instance Australian Securities and Investments Commission v Fortescue Metals Group Ltd (No 5) (2009) 264 ALR 201 at [474]-[629] and James Hardie Industries NV v Australian Securities and Investments Commission (2010) 274 ALR 85 at [531]-[540]. Now all of this is to be understood in the context of s 677.

(2)    and in ANZ v ASIC (at 394 [53]):

Evidence of the actual effect of the information disclosed on the share price may be relevant in determining whether s 674(2) of the Corporations Act has been contravened. As was explained by Perram J in Grant-Taylor in the extract above (at [46]), such evidence may constitute what amounts to a cross or reality “check” as to the reasonableness of an ex-ante judgment about a different hypothetical disclosure: Fortescue (at [477] per Gilmour J).

48    Unsurprisingly, when the matter of splitting the issues in the way contemplated was first floated, the notion of the usefulness of this “cross-check” evidence was fastened upon by the respondents as a reason to resist the separation of contravention and causation of loss.

49    Apart from the simple case when such material is often unnecessary, event study evidence is also often problematical at the materiality stage in cases whether the pleaded information is more complex. The utility of event study analysis in such cases has been brought into sharp focus by the recent experience of the Court in several matters. In highly complex cases, the material information can be defined in a multitude of different ways, and the Court’s finding as to what constituted the contravening conduct may be a combination of several separate matters alleged by the applicant in all sorts of possible combinations.

50    The potential difficulty in parties commissioning event studies prior to the Court deciding on the precise nature of the contravening conduct is the need for the event study expert to envisage every possible permutation and combination of alleged contraventions for the regression analysis to be calibrated to every eventual possibility. This necessarily adds to the length and complexity of such event studies. Further, as has been seen in some recent cases, even where contravening conduct has been proven, the applicant has nonetheless failed to discharge its evidentiary and persuasive burden of proving the market effect of the contravening conduct because of a failure to anticipate the precise nature of the contravening conduct found.

51    Of course, any deficiencies in this market-based analysis would not be fatal to individual reliance cases, which do not rely on market-based causation. But it is almost invariable that a market-based causation case will be part of an applicant’s representative claim.

52    But as sure as night follows day, if an applicant puts on complex evidence relating to materiality, the respondents are likely to respond. If an event study is put on with a multitude of different combinations, then the respondents are also likely to respond. To the extent that these studies rely on ex-post analysis, in my view, in many cases, almost all of this work is wasted when it comes to determining whether contravening conduct has occurred (or at least is often of very limited utility).

53    Ultimately, it is for the applicant to discharge the burden of proving materiality. A forensic decision will need to be made as to what evidence is adduced on the question of contravention, as distinct from proving causally-related loss.

54    It seems to me that it may be a real benefit in some cases in separating out the issue of contravention. Not only does this allow for both the parties and the Court to be focused on the correct ex-ante analysis, but it also serves to prevent unnecessary or unnecessarily long and complex event studies, or other materiality evidence, dealing with conduct which may never be proven.

B.6    Applicants’ proposed separation of issues

55    In this case, however, the applicants have taken a different course, which can be summarised as follows.

56    Senior counsel explained that the task for the Court at the initial trial would be to answer questions as to “whether there was a distortion of information” as a result of conduct, which “was at least apparently, if not actually”, a contravention of ss 1041E or 1041H of the CA, and subject to any cross-checking evidence “looks potentially like a contravention”.

57    Turning to a question, which was framed by the applicants as apt to be dealt with at an initial trial (Applicants’ Proposed List of Issues at [31]):

Did the FY16 Information have the character pleaded at CSOC [97(a) and (b)(ii)]?
[Applicants propose to defer CSOC [97(b)(i) to stage 2 trial]

58    The Consolidated Statement of Claim at [97] is pleaded in the following terms:

97.     On and from 19 August 2016, the FY16 Information:

(a)    was not generally available; and

(b)    was information:

(i)    that was likely to influence persons who commonly invest in securities in deciding whether to acquire BLA shares;

(ii)    that a reasonable person would expect to have a material effect on the price or value of BLA shares,

within the meaning of s 674 of the Corporations Act.

59    With respect to the careful submissions made on behalf of the applicants, I think this is the worst of all possible worlds. It runs the real risk of the Court being engaged in impermissible hypothetical speculation about whether or not there had been contravening conduct, without attending to the judicial task of determining whether or not such conduct exists.

60    If there had been a split as I proposed, then both parties would have been free to adduce whatever evidence that is relevant in relation to the issue of contravention. Hence it would be for the applicants to make a decision as to what evidence it adduces on materiality and the respondents to make a decision about what evidence they would adduce to respond.

61    It might be thought that in many cases (and I will not comment on the circumstances of this case for obvious reasons), it will be simply pointed out to the judge that if the information existed, then anyone with any sense would understand that that information, if revealed, would be likely to have a material effect on market value. If a respondent, in such a case, wished to adduce event study evidence on the question of contravention, then whether that evidence would be admitted would be judged by reference to whether it could rationally affect, directly or indirectly, the issue of materiality.

62    If there is to be a split between contravention and causation of loss, it seems to me it needs to be a clean split. Therefore, I would decline to make the somewhat vague and potentially ambiguous orders proposed by the applicants.

63    It is then necessary to the turn to the adjournment application.

B.7    Discovery and prospective amendment application

64    This case has a long history: it has not moved at the pace of summer lightning.

65    Investigations for this class action began as early as 2018, with the second applicant, Mr Furniss, shortly thereafter making an application in the Supreme Court of Queensland seeking orders under s 247A of the CA for the inspection of various categories of the books of Blue Sky Alternative Investments Limited (Blue Sky), which at that time was in administration.

66    Mr Furniss was successful in his application to obtain orders for access of approximately 329 documents comprising over 9,000 pages of accompanying books, including:

(1)    board packs, papers, minutes and agendas;

(2)    audit committee packs, minutes, papers and agendas;

(3)    reports commissioned by Blue Sky from KPMG in relation to the valuation of certain funds;

(4)    audit plans and closing reports in relation to audits conducted by Ernst & Young (EY); and

(5)    insurance policies responsive, or potentially responsive, to the potential claims Mr Furniss had identified.

67    Mr Furniss’ proceedings were initially commenced in 2022 and subsequently became consolidated.

68    In February 2024, the applicants were provided with over 8,000 documents, being those sought by the Australian Securities and Investment Commission (ASIC) in its investigation into matters the subject of these proceedings. The books required to be produced to ASIC were very broadly identified in a notice (ASIC notice), and included:

(1)    all books comprising agendas, papers and minutes of meeting in respect of all meetings of the directors of Blue Sky, from 1 January 2016 to 12 June 2018 (relevant period);

(2)    all books comprising agendas, papers and minutes of meeting in respect of all meetings held by the audit committee of Blue Sky, that were held during the relevant period;

(3)    all records of communication during the relevant period involving Blue Sky, relating to or referring to reports published by an entity described as Glaucus, being a foreign short seller whose reports gave rise to some market disquiet concerning Blue Sky in a manner not necessary to further canvas for present purposes;

(4)    all books created during the relevant period relating or referring to various market updates, including any records of communications relating to or referring to those market updates;

(5)    all books evidencing the existence of individual assets held under various business units of Blue Sky during the relevant period; and

(6)    all books created during the relevant period which evidence all assets that Blue Sky considered to have a material impact on Blue Sky’s financial results during the relevant period.

69    It is fair to say that this was a very broad notice.

70    Correspondence then ensued between the solicitors of the applicants and Blue Sky, between July and September 2024, whereby Blue Sky invited the applicants to articulate a basis upon which further discovery needed to be provided to Blue Sky, and why it would be necessary in circumstances where the applicants were already in receipt of more than 8,000 documents that had been produced to ASIC.

71    By November 2024, the applicants had proposed that non-party discovery be given by the then Receiver of Blue Sky, and sought orders requiring the Receiver to give discovery the entirety of Blue Sky’s file server and “Office 365 environment”.

72    This issue remained controversial as between the parties in November 2024, when a case management hearing was conducted. Senior counsel then appearing on behalf of the applicants pressed for further discovery and made several complaints about the failure to be apprised of information with sufficient time prior the case management hearing to ascertain what steps needed to be taken to address completion of discovery. Following a long discussion about this and related issues, senior counsel noted that:

[It is] almost inevitable in this case – in all these cases, that we will amend the case once we’ve been through discovery and the like, but I simply note that, your Honour, for present purposes. I don’t have an application, but it’s unremarkable. And in terms of when that would happen, it would, obviously need to happen before the time that your Honour decides what to do with experts and the like …

73    In response, I noted that:

There’s amendments, and there are amendments.

74    In expanding upon that observation, I noted that there are the “usual” amendments which reflect information that has come to light through the discovery process, and which effectively allow an applicant to particularise the nature of existing claims and synthesise matters requiring some reformulation. As I noted, that was the sort of thing that happens in class actions “all the time”. But I then went on to say:

I’m just drawing distinction between that sort of amendment and other amendments, which is a complete recasting of the case or joining new parties or things such as that. And I understand you’re referring to the first type of amendments.

75    Senior counsel responded in the affirmative but then noted that if he had an application to make of either kind of amendment, it would be made at the time he has to make it. However, his consent to orders being made on that day was conditioned by noting that the applicants are highly likely to propose making some form of amendment having looked at and considered the completed discovery.

76    At the same time, I also indicated my desire for the early identification of questions for experts so that I might consider matters being the subject of inquiry and report, or some other cost-effective means of placing opinion evidence before the Court. Senior counsel noted that given the matter was coming back in August 2024, that there would be plenty of time to obtain expert evidence (if that course found favour with the Court) to allow a trial to occur in August 2026.

77    The following exchange then occurred:

HIS HONOUR: Yes. But it may not be if they want their lay evidence to occur after that, that is, they want expert evidence and lay evidence and then – all I’m doing is foreshadowing that I can see some – having been involved in this process in all of how long it has taken to do evidence in [audit] negligence cases, all I’m saying is I don’t want to be in a situation where someone’s saying to me in the later part of next year we can’t get this ready by the middle of 2026 because if it’s not done by the middle of 2026 then that might cause problems.

SENIOR COUNSEL: And it is a concern that is rightly noted, but what I would say in relation to that, your Honour, is that if your Honour does go down the traditional expert evidence path, what would happen was we would be putting on our expert evidence in a few months of August, my friend would be putting on his expert evidence and his lay evidence at the same time. So it’s not as if there would be a further step after his expert evidence comes on before his lay evidence comes on, and we think 12 months from go to woe on evidence before a trial is plenty of time.

HIS HONOUR: You may well be right. You may well be right, but we’re in a better position to judge down the track.

SENIOR COUNSEL: Is your Honour saying that your Honour is not going to set the matter down for trial now?

HIS HONOUR: No, I’m going to set it down for trial in 2026.

SENIOR COUNSEL: And I think that means, having regard to my friend’s issues and my own, that we are really looking at July/August.

HIS HONOUR: Yes.

78    Following the November 2024 case management hearing, to progress issues relating to additional discovery, I made an order appointing an experienced barrister as a Discovery Referee to inquire into the discovery which the Receiver should provide pursuant to r 20.23 of the Federal Court Rules 2011 (Cth), and the optimal manner by which discovery should be undertaken. The Discovery Referee’s report was provided to the Court on 21 March 2025, and on 14 May 2025, the Court made orders which, in effect, adopted the methodology proposed by the Discovery Referee, save with respect to the treatment of privileged claims.

79    In allowing the applicants’ supplementary discovery from the Receiver, I noted during argument that I was:

… far from convinced [that the order] is necessary in order for the applicants to run their case, given the production that has occurred pursuant to [earlier productions]. But if [the applicants] want to pay for it, they will have to pay for it, but I am just trying to be fair to both parties.

80    Importantly, the Discovery Referee had expressed the view that it was not part of his role to decide on the need for discovery, and whether it had been adequately justified. The Discovery Referee said that that bridge had been crossed principally because the orders made appointing a referee contemplated that the Receiver “shall provide” discovery (despite no separate formal order to do so).

81    Apparently, search terms adopted for the discovery process resulted in the identification of over half a million additional documents for production, and after orders were made on 21 July 2025, providing for the refinement of search terms, revised search terms were proposed by the applicants, which resulted in a total of 269,165 documents being captured for discovery by the Receiver.

82    One can only approach these things on the basis of one’s experience, and a degree of intuition, but given the breadth of the material that has already been provided to the applicants, it would be passing strange that there would likely to be significant new revelations in the additional discovery, on the assumption, of course, that there had been proper production in answer to the ASIC notice, and even accounting for a slightly longer period examined as the subject of this matter.

83    I confess that in the light of this history I have real concerns, which I have previously expressed in this case, that the applicants’ (on one level understandable) desire to chase down every potentially discoverable document, will mean that they may be in danger of spending a good deal of unnecessary time and money.

84    Having said that, the applicants are represented by one of the most experienced leading counsel in this type of litigation. He assures me, and I accept, that he cannot say to me today that I will not be faced with a substantive amendment application which may expand or otherwise change substantively the current applicants’ case. That is, I may be faced with the second type of amendment application that I referred to when this matter was discussed as long ago as November 2024. In this way, it can be seen we have moved no further on from the state of uncertainty that existed at that time.

85    The response of the applicants to this, of course, is to say: “Well, this is hardly surprising as we have only now just received a significant part of the additional discovery, and we will not complete our review of the material for some time yet”. But, as I hope I have already explained, this response rather begs the question of whether, and, if so, what, amount of this additional work is truly necessary.

C    WHERE DO WE GO FROM HERE?

86    A timetable has been proposed by the applicants which accommodates the provision of expert evidence in this case being filed by the applicants in the usual way and allowing them time to confer with the benefit of additional discovery with either their testimonial or other experts to ascertain the extent of changes that should be proposed to the pleading.

87    According to this timetable, it is not until 17 April 2026 that the applicants will be able to tell the Court what case they propose to advance at trial. This seems to me to be an entirely unsatisfactory state of affairs.

88    I have not been taken directly to any evidence as to the precise work that has been done by the applicants’ solicitors in reviewing the material that has been in their possession for a long period of time, and why it is that it is anticipated that there are profound or, at least, significant and material deficiencies in that information.

89    The more I considered the timetable proposed by the applicants, the more it became evident it was wholly unrealistic in allowing the respondents sufficient time to respond to the material filed so as to allow the case to commence on the current commencement date of 3 August 2026.

90    Ordinarily, it might be thought that whatever misgivings I have, the better course is to allow the discovery process to play out, to see the extent of the amendments that materialise, and try to keep the matter on track for hearing in August 2026. Indeed, at the last case management hearing, I was so intent upon that course that I indicated that I wanted to keep the present hearing date “come hell or high water”. That intention was fortified by evidence I received on behalf of one respondent noting personal reasons why it is necessary that the vexation caused by this litigation be finalised as quickly as possible.

91    One of the difficulties dealing with this matter today is the fact that notwithstanding the respondents wanting to keep the hearing date, I have not been provided with any comprehensive set of orders by the respondents identifying the questions the experts should be asked (other than proposed expert evaluation questions handed to me after an adjournment, at 2:15pm this afternoon). Apart from this late material, I only have the useful submissions made on behalf of the EY as to alternatives proposed to the applicants’ existing questions that were provided to me before the case management hearing.

92    So where does this leave us?

93    The case at present is an unwieldy one. There are several related tasks which have always seemed to me to be apt to be the subject of early identification into precise expert questions and then the subject of inquiry and report by a referee.

94    Through the inability of the parties to formulate expert questions (a matter I raised as long ago as last year), I still do not have a consensus between the parties as to the expert questions that arise on the current pleading, let alone speculation about what any amendment might bring forth.

95    Already, I have several matters listed for hearing in 2026 and indeed, have some matters listed for the beginning of 2027.

96    Several case management hearings have occurred during the course of the last couple of weeks, where I have had to deal with litigants who have punctiliously complied with Court orders to ready matters for hearing, only to be met by the response that I will stand over their cases to December 2025 in order to ascertain the state of my diary, in the hope that some matters will settle, or there may be other available time in my diary in order to allow their case to proceed to a hearing.

97    As has been said several times, a person is entitled to their day in court, but they are not entitled to another person’s day in court. The applicants cannot proceed at the pace they have travelled and just expect the Court to continue to allow them to “reserve” a lengthy hearing date. The efficient use of Court time and the optimal diarising of hearing dates transcends the interests of these parties.

98    I cannot let the current uncertainty continue. The timetable proposed by the applicants is unrealistic. Although I am acutely conscious of the stress caused to individuals by unresolved litigation, I do think it could render a potential unfairness to the applicants in forcing them on which, in my view, would have the necessary consequence of shutting them out from making an amendment they have long foreshadowed.

99    Further, I also do not believe it is consistent with the overarching purpose for me to accept, by default, the combined position taken by the parties for expert evidence to be served in the traditional form. My preliminary view is that acquiescence in such a course will only significantly extend the hearing and cause the time for the delivery of judgment to expand.

100    Accordingly, the course I propose to take is to vacate the current hearing date, but to order that the applicants bring any application to amend this pleading by December this year.

101    If there are many further documents the applicants think they need to go through, or further inquiries they need to make, then they will just have to devote additional resources to allow that task to take complete over the course of the next three or four months. I will also require both parties to cooperate constructively with the Court, and to prepare a list of expert questions in respect of the existing pleading, and any proposed pleading.

102    If all these tasks are completed in a timely way (and I can make appropriate programming orders at a case management hearing in December this year), there is still a chance that a hearing can occur in the latter part of 2026 (although, as I have already explained, I cannot conceive of how it could occur prior to August).

103    If, as I strongly suspect, there is a substantive amendment application made in December, it should be accompanied by an affidavit by a solicitor deposing to why it is that the newly discovered documents have caused a need to amend the pleading. The respondents will then, if they so wish, have the opportunity to challenge such evidence if the proposed amendment is contested.

104    Adjournment is a less than ideal outcome. I do, however, think it is the one that does least injustice or potential injustice, even though I have a nagging feeling that the applicants really should already know the final case they wish to run at trial by today.

D    CONCLUSION AND COSTS

105    I raised with the applicants as to why an order ought not be made that the applicants pay the costs thrown away by the vacation of the hearing date. In response, senior counsel submits such costs should be reserved, because there is no adequate material before the Court in order to make the evaluative assessment that the applicants are somehow to blame for the fact that the non-party discovery has only recently been provided.

106    I am unpersuaded by this submission. I do not think that there is any basis upon which I should not make the usual order about costs following the vacation of a hearing date by a party.

107    The matter was set down for hearing with the active encouragement of the applicants. Nothing the respondents have done in relation to the provision of documents has caused the applicants not to be in a position of putting cogent material before the Court as to why it is that the initial tranches of documents have been insufficient in order for them to be no more advanced than they were in November 2024.

108    Cost orders are compensatory. There is no reason why the applicants should not be required to pay the respondents’ costs occasioned by this delay. This is view is fortified by the applicants adopting the position (to adopt the words of senior counsel) that “given a choice between losing the right to amend and losing the trial date, [the applicants] will lose the trial date”.

109    Needless to say, if the parties work cooperatively together, those costs, hopefully, will be relatively modest in circumstances where there is at least some prospect of the case getting on in late 2026.

110    The matter will be listed for case management hearing at 9:30 am on 15 December 2025.

111    By 5 December 2025, the applicants should have served any proposed amended pleading together with any affidavit evidence they rely upon in support of leave to amend. The parties are to attend a conferral in person, attended by at least one counsel briefed to appear in the matter to occur in the week commencing 8 December 2025, and following that conferral, I wish to see either an agreed or separate documents identifying with precision the questions said to be the appropriate subject of opinion evidence.

112    Further, by 12 December 2025, the parties are to nominate a proposed expert, or experts in any field of expertise covered by those expert questions, to give expert evidence. If the respondents cannot attend to this task because the pleading gives rise to a wholly new field of expert (which seems to me unlikely), then this can be raised with me when the matter is next before the Court.

Associate:

Dated: 10 September 2025

SCHEDULE OF PARTIES

No: NSD665/2022

Federal Court of Australia

District Registry: New South Wales

Division: General

Applicants:

Second Applicant:            DAVID FURNISS

Respondents:

Second Respondent:             ROBERT WARNER SHAND

Third Respondent:             JOHN BRUCE KAIN

Fourth Respondent:             ERNST & YOUNG (A FIRM) ABN 75 288 172 749

Fifth Respondent:    CHUBB INSURANCE AUSTRALIA LIMITED ACN 001 642 020

Sixth Respondent:    DUAL AUSTRALIA PTY LTD ACN 107 553 257 ON BEHALF OF CERTAIN UNDERWRITERS AT LLOYD’S BEING:

i)    LIBERTY MANAGING AGENCY LIMITED FOR AND ON BEHALF OF SYNDICATE 4473;

ii)    ASTA MANAGING AGENCY LTD FOR AND ON BEHALF OF SYNDICATE NO. 2786 EVE; AND

iii)    HARDY (UNDERWRITING AGENCIES) LIMITED, MANAGING AGENT FOR AND ON BEHALF OF LLOYD’S SYNDICATE HDU 382

Seventh Respondent:    ZURICH AUSTRALIAN INSURANCE LIMITED ACN 000 296 640

Eighth Respondent:            XL INSURANCE COMPANY SE ARBN 083 570 441