Jurisdiction - Australia
Australia – High Court Rejects Shareholder Claim For Loss In Misleading And Deceptive Conduct.

21 November, 2012


Legal News & Analysis – Asia Pacific – Australia – Insolvency & Restructuring


What you need to know


  • In assessing claims for reliance on misleading and deceptive conduct, a shareholder will be required to establish reliance on the misleading and deceptive conduct to establish that its loss was caused by the conduct.
  • Practitioners should be aware that the amendments to section 563A of the Corporations Act 2001 (Cth) should limit these types of claims by shareholders of an insolvent company in future.


De Bortoli Wines Pty Limited v HIH Insurance Limited (In Liquidation) & Ors [2012] HCASL 157


HIH Insurance Limited (In Liquidation) (“HIH“) was placed into provisional liquidation in March 2001 and the liquidators of HIH were appointed in August 2001.


At the time of HIH’s provisional liquidation, De Bortoli Wines Pty Limited (“De Bortoli“) held more than 19.5 million shares. The shares had been acquired by De Bortoli over the period 11 August to 22 December 2000 in some 66 transactions. De Bortoli’s managing director, Mr Darren De Bortoli, made the decision to purchase the shares on its behalf.


In February 2009, De Bortoli lodged a proof of debt for the cost of the shares in the winding up of HIH. The liquidators rejected the proof of debt and De Bortoli appealed against that determination to the Federal Court of Australia (Stone J), the Full Federal Court of Australia (Jacobson, Siopis and Nicholas JJ) and the High Court of Australia (Heydon and Bell JJ).


HIH admitted that statements contained in three documents were misleading or deceptive or likely to mislead or deceive. The issue was whether there was a causal connection between the statements that were admitted to be misleading or deceptive and De Bortoli’s loss.


The High Court held that although misleading and deceptive conduct was admitted, an inference of reliance was displaced in circumstances where share purchases were made in a falling market. Mr De Bortoli’s strategy of investing in companies where there had been a significant drop in the share price and failing to take into account a company’s financial position notwithstanding negative press and stockbrokers’ views of the HIH share price were inconsistent with a claim for reliance. Further, it would be necessary to prove actual reliance in order to establish that De Bortoli had suffered loss and damage by the conduct of HIH.


Ashurst Australia acted for HIH and its liquidators against De Bortoli in the Federal Court of Australia, the Full Federal Court of Australia and the High Court of Australia. The High Court of Australia’s decision to refuse special leave was handed down on 13 November 2012





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