Masters v Lombe (liquidator), in the matter of Babcock & Brown Limited (in liq)

The appeal in Masters v Lombe, in the matter of Babcock & Brown Limited (in liq), arose from claims by shareholders against the liquidator of Babcock & Brown Limited, seeking damages for alleged breaches of continuous disclosure obligations under the Corporations Act 2001 (Cth) and ASX Listing Rules 3.1 and 3.1A. The shareholders argued that the company’s non-disclosure of material information caused an inflation in the share price, leading to financial loss when the share price subsequently fell. The primary judge dismissed the claims, finding that there was no contravention of the continuous disclosure obligations and, therefore, no causal link to the alleged financial loss.

The legal issues before the court included whether the primary judge erred in finding that there was no contravention of the continuous disclosure obligations, and if such contraventions existed, whether they would have caused an inflation in the share price. The court also had to determine if the market-based causation theory, which posits that a company’s share price is influenced by the market as a whole rather than specific non-disclosures, was applicable. Furthermore, the court needed to assess whether the primary judge’s findings warranted the rejection of proofs of debt and whether the appeals from those rejections had merit.

The court found that the primary judge’s findings were not materially in error. The appeals were dismissed as the appellants failed to provide evidence of contraventions or resultant financial loss. The court held that the market-based causation theory was not applicable, and no evidence was presented to support the claim that the alleged non-disclosures caused the share price inflation. Consequently, the court affirmed the primary judge's decision to reject the proofs of debt, and the appeals were dismissed with costs awarded to the respondent.