The Australian matrix of public and private corporate conduct enforcement works – ASIC takes on Big Star.

Federal Court holds director breached duties, and should have disclosed details regarding the sale of assets and identity of purchaser.

Whilst not a class action, this was a civil penalty proceeding brought by the Australian Securities and Investments Commission (ASIC) alleging that the first respondent (then known as Antares Energy Ltd) (Antares) and its Chairman and Chief Executive Officer (Mr Cruickshank) had contravened the continuous disclosure provisions of the Corporations Act 2001 (Cth) (CA). Antares itself did not defend the proceeding, such that Mr Cruickshank was the only active respondent.

In short, the facts were that Antares was an oil and gas exploration and production company listed on the Australian Securities Exchange (ASX). Its assets included certain oil and gas properties in Texas, USA, known as the ‘Northern Star Assets’ and the ‘Big Star Assets’. On 5 September 2015 (a Saturday) Antares entered into two contracts with Wade Energy Corporation to sell those assets for a combined total in excess of US$250 million (an amount which was, at that time, 15 times Antares’ market capitalisation). On the following Monday (7 September 2015) Antares announced to the ASX the entry into those two contracts. The announcement, however, did not disclose the identity of the purchaser under the contracts, nor any other information concerning the purchaser’s ability to complete the contracts. A further announcement was issued by Antares a few days’ later which again failed to disclose the identity of the purchaser, but did state that there “are no conditions precedent to be effected prior to settlement”. A few days’ later, the shares of Antares were placed in a trading halt, when ASIC and ASX insisted that the identity of the purchaser must be disclosed. The shares were subsequently suspended from trading. The identity of the purchaser was eventually disclosed to the ASX on 4 December 2015, in the context of disclosing an amendment to the contracts to extend the date for completion. Ultimately, however, the contracts did not complete.

The above announcements caused a massive increase in the trading volume of Antares’ shares, together with a massive increase in Antares’ share price (which rose from $0.09 on 4 September 2015, to $0.315 on 7 September 2015, and to $0.50 on 10 September 2015).

ASIC alleged that Antares contravened the continuous disclosure provisions by failing to disclose: (i) the name of the prospective purchaser under the contracts; or (ii) alternatively, the name of the prospective purchaser, the fact that Mr Cruickshank had specifically been told that the purchaser did not have financial approval in place for both relevant acquisitions, and that Antares had not otherwise independently verified or determined the capacity of the purchaser to complete the acquisitions. ASIC further alleged that Mr Cruickshank was ‘involved’ in those contraventions and/or breached his duties as a director of Antares (by failing to cause Antares to comply with its continuous disclosure obligations). Mr Cruickshank asserted that disclosure of the purchaser’s identity would potentially have prejudiced the transactions, and that the purchaser insisted on its identity being kept confidential (despite the fact that neither of the contracts expressly imposed any such obligation).

The judgment is lengthy, running to some 534 paragraphs(103 pages). However, some of the key points to note are:

  • Mr Cruickshank sought to draw comfort from the ASX’s Guidance Note 8 concerning continuous disclosure, in contending that the identity of the purchaser was not required to be disclosed. As to this, Banks-Smith J said (at [225]):

I do not accept that the wording of Guidance Note 8 introduces a level of ambiguity or choice as to whether or not certain information is to be disclosed. It must be recalled that there may well be circumstances where information does not need to be disclosed: Listing Rule 3.1A expressly provides for this. Further, some of the information listed in cl 4.15 of Guidance Note 8 may be trivial or may not be relevant or material depending on the circumstances of a particular transaction. The drafting of Guidance Note 8 (and recalling it is not a legislative provision) allows for such potential, whilst guiding the reader as to matters to be given attention. It does not modify or ameliorate the obligations under Listing Rule 3.1. Any assessment of disclosure must have regard to the particular commercial terms of the relevant transaction and the obligations of Listing Rule 3.1. It would be contrary to the intent of the Listing Rules … and the legislative scheme if Guidance Note 8 were to be understood in such a way that it diluted the obligations of continuous disclosure.

  • At [230]ff his Honour set out the general principles, distilled from previous cases, relating to continuous disclosure.
  • At [240] his Honour stated, contrary to Mr Cruickshank’s submission, that the question of ‘materiality’ (i.e. 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 shares) is a matter that is appropriately a subject for expert evidence. In that regard, ASIC led expert evidence from a Mr Lee Bowers, whose qualifications are set out at [332]ff. Mr Cruickshank challenged Mr Bowers’ expertise, but his Honour rejected that challenge and generally accepted Mr Bowers’ evidence.
  • At [243] his Honour stated that the continuous disclosure provisions in the CA are remedial or protective provisions which “should be construed beneficially to the investing public and in a manner which gives the fullest relief that the fair meaning of their language allows”.
  • At [258] his Honour noted the importance, in continuous disclosure cases, of “identify[ing] with some precision the information which the plaintiff alleges the company was aware of and should have disclosed”.
  • At [275]ff his Honour found that Mr Cruickshank was aware, prior to the relevant announcements, that the purchaser did not yet have financial approval in place for the acquisitions, and that Antares had also not carried out due diligence or otherwise determined the capacity of the purchaser to complete the contracts, as had been alleged by ASIC.
  • At [306]ff his Honour found that the information in question did not fall within the exceptions in ASX Listing Rule 3.1A.
  • At [455]-[456] his Honour concluded that Antares had contravened s 674(2) of the CA in both of the alternative respects (as set out above) alleged by ASIC.
  • At [457]ff his Honour dealt with the case against Mr Cruickshank. The parties differed as to the applicable principles. ASIC contended that in order to contravene s 674(2A) of the CA, and having regard to s 79 of the CA, a person must be aware of the existence of the information to which it is alleged Listing Rule 3.1 applies and that such information was not generally available; and must know of the underlying facts from which the Court could infer that a reasonable person would have expected that the information would have been likely to influence an investor in making a decision whether to acquire or dispose of securities in Antares, if it had been generally available. Mr Cruickshank, on the other hand, contended that ASIC must prove that he had actual knowledge of the information, the fact the information was not generally available and that the information was information that a reasonable person would have expected, if it were generally available, to have had a material effect on Antares’ share price. His Honour ultimately accepted Mr Cruickshank’s contention, and thus set what could only be described as a very high bar for proving ‘involvement’ in a continuous disclosure contravention (at [493]-[498]):

[493] It is necessary to establish that Mr Cruickshank knew the particular information; knew that it was not information that was exempted from disclosure by Listing Rule 3.1A; that it was not generally available and that it was information that, in the context of what was being disclosed by way of the … Announcements and what was otherwise publicly available to the market, a reasonable person would have expected, if it were generally available, to have had a material effect on the company's share price, or would be likely to influence persons who commonly invest in shares to acquire or dispose of shares.

[494] It is not necessary to prove that Mr Cruickshank knew that Antares was in breach of its continuous disclosure obligations, described in that manner. It is not necessary that he knew that the facts could be characterised in that manner. Nor must ASIC establish that Mr Cruickshank acted with the purpose or intent of influencing investors.

[495] However, the essential elements of the contraventions are such that the bar may be high in a case such as this for ASIC to establish the requisite knowledge…

[498] In order for ASIC to establish that a reasonable person would expect the information to have the requisite materiality, it was necessary to receive and accept the detailed evidence of Mr Bowers [the materiality expert] as to the manner in which the information would have impacted on the decision‑making processes of the Relevant Investors. It might seem attractive to conclude that the technical nature of the expert evidence in this case – with its assessment of the class and the relevance of pieces of information to the identification of mispricing and the assessment of completion risks – reveals the difficulty of assessing the impact of information on the market such that a director should not be assumed to have such knowledge.

  • In the end result, therefore, his Honour was not satisfied that ASIC had established that Mr Cruickshank was ‘involved’ in Antares’ continuous disclosure contraventions; but nevertheless, his Honour held that Mr Cruickshank had breached his duties as a director of Antares by causing Antares to contravene its continuous disclosure obligations (and that the ‘business judgment’ defence, on which Mr Cruickshank had relied, was not available).

Australian Securities and Investments Commission v Big Star Energy Ltd (No 3) [2020] FCA 1442
Federal Court of Australia, Banks-Smith J, 9 October 2020;
Applicants’ Solicitors: Australian Securities and Investments Commission;
Second Respondent’s Solicitors: DLA Piper;
Applicants’ Funder: N/A;
Austlii link:;query=[2020]%20FCA%201442;mask_path=


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