Background
McPherson’s Limited, an ASX-listed health, beauty and wellness company, forecast on 20 October 2020 that its profit before tax would grow during FY21. The forecast assumed substantial sales of Dr LeWinn’s skincare products through McPherson’s Chinese-market joint-venture partner, ABM AU. Six days later, ABM supplied a revised purchasing forecast that was materially below McPherson’s budgeted sales to ABM.
McPherson’s did not withdraw its profit forecast until 1 December 2020. In the intervening period, it completed an equity raising, issued a cleansing notice and repeated its profit guidance at its annual general meeting. ASIC alleged that McPherson’s breached its continuous-disclosure and misleading-conduct obligations and that its then CEO and managing director, Laurence McAllister, breached statutory duties. The trial addressed liability only.
The Court’s Holding
Justice Markovic held that McPherson’s contravened section 674(2) of the Corporations Act from about 12 November through 30 November 2020. By 12 November, the company knew both ABM’s revised purchasing forecast and the results of the 11 November sales event, which were below ABM’s target. McPherson’s was required to disclose that information and withdraw or update its October profit forecast. Its failure to do so also constituted misleading or deceptive conduct under section 1041H of the Corporations Act and section 12DA(1) of the ASIC Act.
The Court did not find the earlier alleged disclosure breaches established and found no contravention arising from the cleansing notice. It held that McAllister breached section 180(1) by failing to take adequate steps to prevent McPherson’s disclosure and misleading-conduct contraventions. He also contravened section 1309 by authorising the 1 December announcement, which misleadingly conveyed that McPherson’s first learned on 27 November of the poor sales-event results and their inventory consequences, although it had known them since 12 November.
The Court directed the parties to propose declarations and orders leading to a later penalty hearing, including submissions concerning possible relief under sections 1317S and 1318 of the Corporations Act.
Key Takeaways
- A revised customer forecast did not, by itself, establish every disclosure breach ASIC alleged; the obligation crystallised once McPherson’s also knew the below-target sales-event results on 12 November.
- A company may mislead the market through silence when known information requires it to withdraw or update existing earnings guidance.
- An announcement can be materially misleading despite containing literally true statements if omissions create a false impression about when the company learned market-sensitive information.
Why It Matters
The decision illustrates that continuous-disclosure liability may turn on when multiple pieces of information, viewed together, make existing guidance unsustainable. Listed companies must reassess published forecasts as new customer, sales and inventory data arrive rather than wait for final confirmation.
It also underscores the personal exposure of senior executives who do not take adequate steps to ensure timely disclosure or who approve announcements that give a misleading chronology of the company’s knowledge.