Rex Breached Continuous Disclosure Obligations by Delaying Profit Downgrade, Australian Court Finds

Key Takeaways

• Court Finds Rex Breached Continuous Disclosure Rules: The Supreme Court of New South Wales ruled that Rex failed to comply with its continuous disclosure obligations after it no longer had reasonable grounds, from April 14, 2023, to maintain its earlier profit outlook.
• Delayed Profit Downgrade: Rex continued to leave its February 2023 guidance in the market before issuing a downgrade on June 20, 2023, forecasting a $24.2 million (AUD $35 million) group operating loss.
• Non-Executive Directors Cleared: The Court dismissed ASIC's allegations that former non-executive directors breached their directors' duties, and also rejected the regulator's misleading conduct case against the company.
• Former Executive Chair Awaits Penalties: Former executive chair previously admitted the alleged contraventions against him, including involvement in the continuous disclosure breach, with the Court set to determine penalties and disqualification orders.

Deep Dive

The market had been told to expect a profitable year. On Feb. 28, 2023, Regional Express Holdings assured investors it remained "optimistic the Group will have positive operating profits for the full FY23 barring any further external shocks." Four months later, that confidence had dissolved into a forecast of a $24.2 million (AUD $35 million) operating loss. The question before the Supreme Court of New South Wales was not whether Rex's fortunes had changed. Businesses disappoint their own expectations all the time. The question was when the company knew its optimism no longer rested on reasonable grounds, and whether investors should have been told sooner.

The Court answered that question largely in ASIC's favor. It found that Rex breached its continuous disclosure obligations because, from April 14, 2023, it no longer had reasonable grounds to expect the group would achieve positive operating profits for the financial year, despite continuing to leave its earlier guidance in the market. The company did not downgrade its outlook until June 20, more than two months later, when it warned investors to expect the substantial operating loss instead.

The judgment is less about forecasting than about the point at which a forecast ceases to deserve its name. Listed companies are not expected to predict the future with perfect accuracy. They are expected to reassess what they have already told the market when the facts change beneath them. Continuous disclosure exists because confidence, once expressed publicly, cannot simply remain on the books after the evidence supporting it has disappeared.

ASIC Chair Sarah Court said the decision reinforced that principle. "Continuous disclosure is a core obligation for listed entities and underpins Australia's corporate governance framework," she said. "It is critical that investors have access to accurate and timely information that would impact their investment decisions."

The regulator did not succeed on every allegation it brought. The Court rejected ASIC's claims that former non-executive directors breached their directors' duties. It also dismissed the regulator's case alleging Rex had engaged in misleading conduct. Those findings narrow the scope of the judgment without diminishing its significance. The company was found to have failed in its disclosure obligations, but the Court stopped short of concluding that every director or every statement connected to the dispute attracted legal liability.

One part of the case had already been resolved before Tuesday's decision. Six weeks ago, Rex's former executive chair admitted all of ASIC's alleged contraventions against him. He accepted that he breached his directors' duties, was involved in the company's continuous disclosure contravention, and should face pecuniary penalties and disqualification orders. The proceedings will now return to court to determine the relief to be imposed.

The case unfolds against the backdrop of an airline that no longer exists in the form investors once knew. Rex entered voluntary administration on July 30, 2024, prompting the suspension of its shares from trading on the Australian Securities Exchange after nearly two decades as a listed company. In December 2025, it was acquired by U.S.-based Air T and renamed Regional Express Holdings. The company has changed hands, but the legal questions have remained fixed on a much earlier moment, when a listed business continued to project confidence after the Court found the foundation for that confidence had already given way.

It is also not the first time Rex has found itself answering questions about its disclosure practices. In 2021, the airline paid $45,557 (AUD $66,000) to settle an ASIC infringement notice relating to an alleged continuous disclosure breach. That earlier matter carried no admission of wrongdoing. This judgment carries considerably more weight. It draws a careful distinction between commercial optimism and reasonable expectation, reminding listed companies that the law does not punish them for being wrong about the future. It does, however, expect them to recognize when yesterday's confidence has become today's undisclosed risk.

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