Continuous disclosure obligations - what is 'material' depends on the disclosing entity's intentions

Listed companies are required to disclose information 'which a reasonable person would expect to have a material effect on the price or value of securities of the company'.

So what happens if a listed gold exploration company discovers nickel on its tenements and does not disclose this to the market?

This was recently considered by the WA Court of Appeal in the matter of Jubilee Mines v Riley [2009] WASCA 62.

Mr Riley was a director and shareholder of Jubilee, a small listed gold exploration company. He resigned as a director in 1993, but remained a shareholder.

In mid 1994, drilling on a Jubilee tenement identified the presence of nickel. A geologist and the managing director of the company decided, without informing the co-directors or the ASX, that despite the presence of nickel, the company would not further explore the tenement as the company was focused on its gold related activities.

Some years later, the drilling results were disclosed to the ASX. Mr Riley had since sold his shares in ignorance of the nickel data and claimed damages suffered by reason of the company's breach of its continuous disclosure obligations in respect of its nickel find. 

Mr Riley contended that whilst the drilling results did not show a commercially significant nickel resource, the results indicated there was the potential for further nickel exploration.

At trial, Mr Riley succeeded. The Court found that the nickel results should have been disclosed and awarded damages to Mr Riley. Jubilee appealed.

On appeal, the Court found that the company's obligation as to disclosure was to be assessed by reference to its 'actual intentions', not its 'supposed intentions'. Further, the Court found that 'Jubilee was under no obligation to make disclosure following receipt of the (drilling results) at least and until it altered its position and decided to undertake exploratory drilling work, at which time disclosure was in fact made'.

The Jubilee decision means that shareholders seeking to recover losses arising from breach of continuous disclosure obligations must prove the significance of the undisclosed information to the company, assessed by reference to the intentions of the directors, in addition to the significance of the information to a reasonable shareholder.  That seems a surprising result, but reflects the current state of the law.  The decision is of some comfort to companies and their officers.  If the directors and officers of a company do not regard information as significant to the company's operation their conclusion will be afforded considerable weight.

In the current economic climate, the criteria employed to assess the type of information that may have a material effect on a share price and thereby trigger disclosure obligations, is certain to attract further judicial scrutiny. Fortescue Metals and its Director Andrew Forrest are awaiting judgment in Federal Court proceedings concerning the ambit of continuous disclosure obligations.  That decision will no doubt provide further clarification of the ambit of the disclosure required by listed entities.


For further information please contact Cecilia Camarri on 9288 6757 or

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.