The NSW Supreme Court found embattled regional carrier Rex misled the stock market when it claimed it would deliver a strong financial result in 2023, months before declaring a $31.7 million loss.
Justice Ashley Black on Tuesday ruled the Australian Securities and Investments Commission had proven the allegations against Rex and former executive chairman Lim Kim Hai.
But he found ASIC did not prove its case against three former non-executive directors - former chair John Sharp and directors Lincoln Pan and Siddharth Khotkar.
It did not stop the watchdog claiming victory, arguing the cash-strapped carrier had been held to account.
"Continuous disclosure is a core obligation for listed entities and underpins Australia's corporate governance framework," ASIC chair Sarah Court said.
"It is critical investors have access to accurate and timely information that would impact their investment decisions."
On February 28, 2023, the airline released a statement to the market saying it was optimistic the company would post positive operating profits for the financial year, barring any external shocks.
The statement was not corrected until June 20, when Rex forecast a $35 million loss, with 10 days of the financial year remaining.
ASIC had argued the three non-executive directors did not know the February statement was misleading when released, but must have realised later it was.
Justice Black admitted he "hesitantly" found allegations against the three non-executive directors had not been proven, partly because they chose to not give evidence at the hearing.
In April 2023, Lim emailed all three describing Rex's deteriorating sales as "bewilderingly bad" and Justice Black found they should have been concerned.
"Mr Sharp gives no evidence he had regard to additional information, made any further inquiries or did not recognise the risk Rex no longer had reasonable grounds to forecast (profit)," the judgment read.
"Nonetheless, it seems to me reason for concern as to that matter did not rise to the level of actual knowledge of that matter."
Justice Black made similar findings about Mr Pan and Mr Khotkar.
A penalty hearing will be held at a date to be fixed.
The finding against Lim is unsurprising given he admitted the allegations against him in May.
The corporate watchdog sought penalties and disqualification orders against the former directors.
Rex fell into administration in 2024 with about $500 million in debt and was later snapped up by US aviation group Air T via administrators EY in October 2025.
The federal government extended the carrier an $80 million lifeline in late 2024, and bought $50 million of its debt from a major creditor to keep regional routes running.
Rex is Australia's largest independent regional airline, flying to 53 destinations across the nation.
Rex has been contacted for comment.
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