The 2021 amendments to the Corporations Act introduced a fault element to the civil penalty and private causes of action for breach of the continuous disclosure regime. After the amendments, a contravention of s674A or s675A in a private claim requires the plaintiff to establish that the entity acted with knowledge, recklessness, or negligence. Before the amendments, breach was strict.
The amendments were positioned as a structural correction to a regime that had become a vehicle for opportunistic securities class actions. The expectation, in some quarters, was that the action would dry up. It has not. The architecture of the claim has shifted. Defendants should be designing the response to that shift, not waiting for it.
Three observations on what the contemporary defence environment looks like, and where its asymmetries sit.
The first observation is that the alternate causes of action have been the relief valve. Where s674A is now harder to plead, plaintiffs have leaned harder on s1041H (misleading or deceptive conduct in relation to a financial product), s12DA of the ASIC Act, and the common-law claim for misrepresentation. None of those carries the fault threshold that s674A now does. They carry their own architectural requirements – reliance, materiality, causation – but they do not carry the fault gate. The plaintiff bar, predictably, has reweighted its pleading toward those causes. The disclosure case has been re-pleaded as a misleading-conduct case. The real contest, in many proceedings, is not whether the entity was reckless about its disclosure; it is whether a statement made by the entity, in the context of its disclosure obligations, was misleading by what it said or by what it omitted.
That re-pleading has consequences for defendants that are not always grasped. The forensic battleground shifts. The discoverable material widens. The privilege architecture, if not designed for the broader claim landscape from the outset, leaks. And the contemporaneous record becomes the principal terrain.
The second observation is that the fault element makes the contemporaneous record more, not less, important. There is a counter-intuitive point here. Before the amendments, the strict liability regime meant that the plaintiff did not need to prove the entity's state of mind. The contemporaneous record was relevant principally to materiality and to quantum. After the amendments, the plaintiff must establish fault. The record becomes the principal evidence of state of mind – for both sides. The plaintiff seeks records that demonstrate that the entity knew, or that a reasonable person in its position would have known, that the disclosure obligation was triggered. The defendant seeks records that demonstrate that the question was raised, the analysis was done, the decision was reasoned, and the conclusion – even if, with hindsight, wrong – was within the band of judgement that a non-negligent decision-maker could have reached.
The defendant's position is much stronger when the record is well-architected. It is much weaker when the record is patchy, late, or reconstructed. The post-amendment regime is therefore not a regime in which the documentary record matters less. It is a regime in which it matters more, and matters in a different way.
The third observation is that the period between fault-amendment cases working through the courts and the next regulatory environment shift is the design window. Defendants who treat this period as a holiday – assuming the claim landscape will simply ease – will find that when the next round of cases test the fault element under contested conditions, their records are the same patchy records that lost cases under the strict regime. Defendants who treat this period as a reset – and use it to redesign the disclosure-decision architecture – will be carrying records that look meaningfully different in 18 to 36 months when the contests land.
What does that redesign look like in practice? Four elements.
The disclosure decision record. Most ASX-listed entities have a continuous disclosure committee or its equivalent. The committee's records are, in the contested matter, the principal exhibit. A continuous disclosure committee whose minutes record decisions without the contour of the analysis is producing minutes that are evidentiarily thin. A committee whose records capture the question framed, the evidence considered, the alternative views canvassed, the materiality assessment performed, and the disclosure conclusion reached is producing a record that, in litigation, demonstrates the kind of decision-making the fault element supposes.
The pre-decision contemporaneous record. The decision is made at a point in time. The information that fed the decision came in over a period. The record of who knew what when – the email chain, the briefing note, the management report – is the spine of the case for both sides. The discipline is to ensure that the contemporaneous record is intact, that it is preserved in a form that survives forensic examination, and that the privilege analysis on it is run before, not during, a notice to produce. Late-stage privilege calls are forensic disasters; they communicate that the privilege architecture was not in place when it should have been.
The board interaction. The continuous disclosure committee usually reports to the board. The board's record of those interactions is the next forensic layer. Where the board has asked questions, the questions should be in the minute. Where the board has accepted management's view, the basis for acceptance should be on the page. The reasonable-inquiry architecture I have written about in the gatekeeper enforcement context applies here directly; it is the same documentary game.
The privilege architecture. Where outside counsel is involved in a disclosure decision – and counsel often is – the privilege architecture has to be designed before the decision is made, not after. The dominant purpose of the legal advice has to be clear. The document trail has to be structured for it. The mistake of treating privilege as a defensive position to be asserted later, rather than a structural decision to be made earlier, is one I see in many entities. It survives until contested. Then it does not.
The strategic point, on this terrain, is that the post-amendment landscape rewards the defendant who treats the documentary record as an instrument that is designed, not as a by-product that accumulates. The plaintiff bar's shift to misleading-conduct pleading does not change the fundamental observation. The same record, well-architected, defends both claims. The same record, poorly architected, weakens both.
There is an open question on how courts will treat the fault element when the documentary record is well-structured. The fault element invites an inferential exercise. Where the record demonstrates considered analysis, contested views, deliberate weighing of alternatives, and reasoned decision-making, the inference of recklessness or negligence is materially harder for a plaintiff to draw. Whether courts will require something close to documentary contemporaneity to credit the inference, or whether retrospective constructions can be advanced, will be tested in the next several years. The defendant who has the contemporaneous record does not need to win that question to prevail. The defendant who lacks it cannot win it.
This is general analysis. It is not advice on any specific matter. Readers should not act on it without engaging appropriate counsel.
