Causation in Australian Securities Class Actions: Searching for an Efficient but Balanced Approach

Abstract

The correct analysis of proof of causation of loss in securities market nondisclosure class actions (referred to as ‘shareholder class actions’) is hotly disputed. As well as being a matter of doctrinal significance, it has substantial relevance to the practicalities and costs of prosecuting these actions and to the related issue of court efficiency and case management. Traditionally, reliance-based causation is required but market-based causation was considered arguable at an interlocutory stage by the Full Federal Court in a class action. It has also been accepted by the NSW Supreme Court in a non-class action. It is suggested that final judicial acceptance of market-based causation in a class action at trial could be balanced by safeguards that would allow rebuttal of causation in some situations and some limiting of the class. This may allay somewhat the fears of those who see market based causation as contrary to policy and principle.

Keywords: securities regulation, class actions, causation

JEL Classification: K22,K41,G14