Lessons from Dexus v Australia Pacific Airports: confidential information and private capital sale processes

Chief Judge in Equity of the Supreme Court of New South Wales, Justice Hammerschlag’s judgment in Dexus Capital Investment Services Pty Ltd v Australia Pacific Airports Corporation Limited [2026] NSWSC 600 arises from the high-profile dispute between Dexus and the other investors in Melbourne Airport, concerning the sale process initiated by Dexus for interests in the airport that it manages. The impact of the judgment is that, subject to any appeal, Dexus will be forced to sell its A$4.5 billion stake in Melbourne Airport to the other shareholders. 

The fundamental scenario of a sale process involving shares in a closely held infrastructure asset that is owned and operated in accordance with a shareholders’ deed, is very familiar to private capital investors and other market participants. However, the facts of this case and the judgment provide some salient lessons for those drafting shareholders’ deeds, structuring and executing sale processes and triggering and managing default regimes for these types of investments, including the following: 

• potential selling shareholders should carefully review governance documents prior to embarking on a sale process and only use and disclose confidential information accordingly; 
   
• affiliate transfer regimes should be drafted and navigated clearly with current and future scenarios in mind to ensure they provide adequate flexibility for investors; 
   
• boards when considering the exercise of a default power (and particularly those with severe consequences) should treat the process with gravity and implement appropriate guardrails, including to avoid potential conflicts. The proper and thoughtful process followed by the Non-Dexus directors on the APAC Board, provides a helpful road map; and
   
• shareholders should be careful to comply with general obligations in shareholders’ deeds to be ‘just and faithful’ or to act in ‘good faith’, which create a high standard for conduct, especially when there are potential conflicts of interest.

Background:

On 29 May 2026, Justice Hammerschlag, delivered judgment in a complex shareholder dispute that was filed in the Supreme Court of New South Wales in May 2025 and heard in April 2026. 

The dispute centred on a challenge made by Dexus to the validity of a default notice issued to it by Australia Pacific Airports Corporation Limited (APAC) in May 2025 on the basis that Dexus had made unauthorised disclosures of APAC's confidential information to prospective bidders, purchasers and their advisors, during an attempted sale of a 9.7% stake in APAC (Default Notice). 

APAC is the owner of two of Australia's major airports, Melbourne Airport and Launceston Airport, and is arguably one of the most sought after infrastructure assets in Australia. APAC is a privately held corporation, owned by five large institutional investors and investment managers, being: interests managed by Dexus (27.32%) (collectively, the Dexus Bloc), IFM Investors (25.17%), Future Fund (20.34%), SAS Trustee Corporation (managed by TCorp) (18.47%), and Utilities Trust of Australia (managed by HRL Morrison & Co) (8.70%). The interests managed by Dexus are held by the Dexus Bloc, created under the Shareholders’ Deed, which established a regime whereby the members of the Dexus Bloc agreed that their rights, powers or discretions may only be exercised by Dexus for and on behalf of the relevant members of the Dexus Bloc.

The relationship between these shareholders is governed by a shareholders’ deed (the Shareholders' Deed), the genesis of which was to regulate a tightly held bidding consortium. 

In late 2023, Dexus commenced a sale process, known as ‘Project Mercury’, to sell 9.7% of the shares in APAC on behalf of underlying shareholders whose interests it managed. The ‘Sale of Shares’ provisions in the Shareholders’ Deed required shareholders to offer any shares proposed to be sold to a third-party buyer to the other shareholders on the same terms and at the same price. Dexus instead relied on a provision permitting affiliate transfers to execute Project Mercury, on its view that this was permissible provided the third party ultimately entered into a management agreement with Dexus.

During Project Mercury, and without APAC’s knowledge, Dexus gave around 130 prospective bidders, purchasers and their advisers access to a virtual data room containing APAC’s business and financial information, including APAC’s most commercially sensitive document—its 20-year financial forecast. The Shareholders’ Deed imposed strict confidentiality requirements. In particular, confidential information could be disclosed only to a prospective purchaser that had entered into a confidentiality deed with the other shareholders in a form reasonably satisfactory to them and enforceable by any of them. Dexus, however, used a template confidentiality deed that it understood had previously been agreed with APAC, and also entered into side letters amending some of those deeds.

Between February and April 2025, the APAC Board sought information from Dexus as to what information had been disclosed and to whom. As more information regarding the extent of the disclosure came to light, the Board concluded that the disclosures were contrary to the provisions of the Shareholders’ Deed, and the disclosure of the commercially sensitive information had the potential to cause irreparable commercial harm to the Company.

In May 2025, the Board formally issued the Default Notice against the Dexus Bloc asserting a material irremediable breach of the Shareholders’ Deed. The Board resolved that Dexus’ breach was material in light of the significance and substantial consequences of the disclosure and that this breach could not be remedied as the disclosure had already occurred. In accordance with the relevant shareholder default provisions, APAC initiated the compulsory divestment process for Dexus' shares at a price equal to the fair market value, not only for the Project Mercury 9.7% stake, but the entire 27.32% holding. Following receipt of the Default Notice, Dexus commenced proceedings in the Supreme Court of New South Wales, and successfully obtained an interlocutory injunction to immediately restrain the compulsory divestment process pending the determination of the substantive dispute. 

Outcome

The Supreme Court of New South Wales held that: 

• Dexus disclosed APAC’s confidential information in breach of the Shareholders’ Deed; 
   
• the breach was material given the scope of information disclosed, the recipients to whom it was disclosed, and the potential adverse commercial consequences for APAC;
   
• the breach was irremediable as the extent of the dissemination of the confidential information is unknown, the recipients cannot ‘unlearn’ the commercially sensitive information. The Court also found that there had been deliberate concealment of information from the Board and that undermined the ongoing relationship of trust and confidence between the shareholders;
   
• Dexus’ conduct before, during and after Project Mercury in responding to the Board’s requests for information made the breaches graver, which is a factor that goes to both materiality and irremediability; 
   
• as a matter of construction of the Shareholders’ Deed, the Default Notice was validly issued by APAC to the entire Dexus Bloc (including the non-selling shareholders); and
   
• the Board properly exercised its confirmations under the Shareholders’ Deed in confirming the default and issuing the Default Notice. The Court held that Dexus’ arguments that the directors had failed to act justly and faithfully in issuing the Default Notice were irrelevant and the only way the Court could review the exercise of the confirmation and / or hold that the resolutions were to be vitiated would be if Dexus pleaded and proved the equivalent of fraud or bad faith on the part of those without whose participation the resolution would not have otherwise been adopted (which Dexus did not do). 

Justice Hammerschlag ordered that all claims by Dexus are dismissed and the injunction previously in place restraining the sale of Dexus’ holding in APAC be dissolved. The significant practical impact of the judgment is that, subject to any appeal, Dexus will be forced to sell its A$4.5 billion stake in APAC to the other shareholders. 

Takeaways

The Court made a number of observations for private capital investors and other market participants to be aware of.

Confidential information should only be used for sale processes in a prudent manner

The judgment demonstrates the catastrophic consequences that can follow from a failure to comply strictly with contractual confidentiality regimes when conducting a sale process, particularly emphasising the risks inherent in the inadequate governance of information flows. The Court found the breach of the confidentiality regime in the Shareholders’ Deed to be ‘at the heart of this controversy’, providing that all information in relation to any other party’s business must not be disclosed to a non-party to the Shareholders’ Deed, except to a prospective purchaser or assignee of a share who has entered into a deed of confidentiality with other shareholders in a form to their reasonable satisfaction and enforceable by any of them (emphasis added) as permitted by the Shareholders’ Deed. The Court found that the execution of a form of deed poll and side letters by bidders as part of the sale process that was conducted by Dexus did not comply with the requirements of the Shareholders’ Deed, including the ‘cooperation, and pre-agreement, with the shareholders’ that the Shareholders’ Deed contemplates. 

The lesson is clear; potential selling shareholders should undertake a careful review of the shareholders’ deed (and any other governance documents) prior to embarking on a sale process to identify and implement the precise process for the permitted disclosure of confidential information to third parties. Sellers should document their compliance with that process, before a data room is populated and access to confidential information is granted. This is particularly critical when disclosing commercially sensitive information, as was the case given the financial forecast for a 20-year period disclosed to bidders by Dexus.

The judgment is also a reminder to pay careful attention to the drafting of confidentiality clauses when negotiating shareholders’ deeds. Investors should consider the potential flow of information in various sell-down and exit scenarios and ensure that the confidentiality regime in the shareholders’ deed will provide the necessary protections and permissions. 

Affiliate transfer regimes should be carefully negotiated and navigated

The scope of affiliate definitions and related transfer regimes is a feature that is typically heavily negotiated in shareholders’ deeds. The judgment has significant consequences for the application of the regime in the Shareholders’ Deed to the Dexus Bloc, in particular the members of the Dexus Bloc who were not selling their shares as part of the sale process initiated by Dexus. The Court relevantly found that the proper construction of the Shareholders’ Deed is that Dexus, as the manager of the interests of the Dexus Bloc, is taken to be the only ‘Shareholder’ under the Shareholders’ Deed. The Court therefore held that the breach of the confidentiality restrictions by Dexus has the consequence that it did so as the deemed shareholder of all the shares under its management, meaning that all members of the Dexus Bloc were held to have breached the Shareholders’ Deed and therefore were properly subject to the Default Notice. 

Dexus and the non-Dexus shareholders were also not aligned on whether the affiliate transfer regime in the Shareholders’ Deed restricted the proposed sell-down by the Dexus Bloc only to members of the Dexus Bloc. Dexus took the position that an affiliate also includes any other entity or fund which comes to be managed by Dexus and, on that basis, parties who were not part of the Dexus Bloc were also invited to participate in the sale process. The Court ultimately did not express a view on the construction of the affiliate transfer regime because it was not necessary to do so to resolve the breach of confidentiality dispute, other than to say that resolution of the issue would require consideration of the commercial objects of the affiliate provisions and how they are intended to operate in congruence with the Shareholders’ Deed as a whole. 

The judgment highlights the complexities that are inherent when interests in joint ventures are subject to management arrangements. Where investments are managed by third parties, it is critical from both the perspective of the investor and the manager that affiliate definitions and transfer regimes are drafted clearly with current and future scenarios in mind to ensure they provide adequate flexibility. When parties come to using affiliate transfer regimes to execute sales processes, potential sellers should undertake a careful review of the shareholders’ deed prior to embarking on any sale process to ensure compliance. Parties should also scenario test collective shareholder regimes, like the Dexus Bloc regime in the Shareholders’ Deed, before they are agreed to ensure that there are no unintended consequences or that any remaining collective risks are appropriately dealt with in management agreements.   

Boards should be mindful of their duties when triggering default procedures 

Another central issue considered by the Court was the nature and limits of the Board's power to confirm a default and initiate default procedures. The Shareholders’ Deed contained a fairly standard default regime, whereby if a shareholder is in default the Board may, by special resolution, determine that the shareholder is in default and serve a default notice. A default notice suspends the voting and information rights of the defaulting shareholder and initiates a process for the sale of the defaulting shareholder’s shares to the non-defaulting shareholders for fair market value. 

Dexus claimed, among other things, that the Board had given primacy to the interests of the non-Dexus shareholders and that the motivation of the Board in voting to confirm the default and issue the Default Notice was that it would allow the non-Dexus shareholders to acquire the shares held by the Dexus Bloc and to prevent entities within the Dexus Bloc from using the affiliate transfer regime in future. The Court found this argument failed on the substance and on the facts.

The Court held that the Shareholders’ Deed provides a confirmatory role to be played by the Board if a Shareholder is in default and that the validity of such a confirmation depends on directors exercising the power ‘in good faith for the purpose for which it was given’ in accordance with their duties as directors but is otherwise not subject to review by the Court. The Court confirmed that determination by the Board is valid ‘unless Dexus proves the equivalent of fraud or bad faith on the part of those without whose participation the resolution would not have been adopted’. The Court considered that each director independently considered conventional commercial factors and the director's awareness that a beneficial consequence will flow from the Default Notice did not vitiate the resolution, provided it was not the reason for approving the resolution. The judgment also illustrates the importance of delineating the role of nominee directors.

The lesson for Boards when considering the exercise of a default power (and particularly those with severe consequences) is that the process should be treated with gravity and Boards should be cautious to consider the following guardrails: 

• Obtain independent legal advice from external counsel, which should cover both the merits (whether the factual conduct meets the contractual threshold) and the process (what steps the board must follow to exercise the power validly).
   
• Document its deliberative process in a manner that demonstrates each director's independent reasoning, the materials considered, and the legal advice obtained — so that if challenged, the resolution can be defended on its merits. 
   
• Allow reasonable time for deliberation, including, if appropriate, giving the defaulting shareholder an opportunity to be heard.
   
• Directors with potential conflicts (here, the Dexus-nominated directors) should be excluded from the vote, as the Shareholders’ Deed contemplates.

Shareholders should be careful to comply with ‘just and faithful’ obligations

The Shareholders’ Deed required the shareholders to ‘be just and faithful to each other and not act contrary to the interests of [APAC]’ and to ‘act bona fide in good faith to promote and enhance the interests and reputation of [APAC]’. The Court considered that these obligations encompassed ‘obligations to act openly, honestly and fairly, and not to the detriment of APAC or the other shareholders’ and imposed obligations analogous to those of a fiduciary. The Court noted the inherent tension between Dexus’ role as manager to sell the APAC shares for the highest achievable price and its duty not to act contrary to APAC’s interest by disclosing confidential information to achieve this outcome. The Court found that the way Dexus had disclosed confidential information breached this obligation in a material way. 

Shareholders should be careful to comply with general obligations in shareholders’ deeds to be ‘just and faithful’ or to act in ‘good faith’, which create a high standard for the conduct of shareholders, especially when there are potential conflicts of interest.