11-214MR Decision in Fortescue Metals Group appeal
Thursday 29 September 2011
The High Court of Australia today granted special leave for Fortescue Metals Group Ltd (FMG) and its Chairman and former CEO Andrew Forrest to appeal the Full Court of the Federal Court of Australia’s decision of 18 February 2011.
On 18 February 2011 (see 11-26MR) the Full Court by a unanimous decision found Fortescue had engaged in misleading and deceptive conduct and contravened the continuous disclosure provisions of the Corporations Act and Mr Forrest was involved in those contraventions and breached his duties as a director.
ASIC Acting Chairman Belinda Gibson said ASIC will defend the appeal.
‘This case raises important issues which form the bedrock of confidence in the integrity of our markets, including misleading and deceptive conduct, continuous disclosure and directors’ duties,’ Ms Gibson said.
A hearing date for the appeal has not been set.
ASIC’s case against FMG and Mr Forrest, which was first heard in April 2009, centred on a series of announcements FMG made to the market and investors between 23 August 2004 and 1 March 2005 concerning certain framework agreements with three major state-owned Chinese companies.
ASIC alleged FMG engaged in misleading and deceptive conduct by overstating the substance and effect of agreements with the three Chinese companies, in ASX announcements, media releases and investor presentations.
ASIC also alleged FMG failed to comply with its continuous disclosure obligations under the Corporations Act 2001 (the Corporations Act) by failing to disclose the contents of the agreements and by failing to correct the misleading announcements.
In relation to Mr Forrest, ASIC alleged Mr Forrest was involved in FMG’s alleged contraventions and also, that he breached his duty as a director to exercise care and diligence under the Corporations Act, by failing to ensure FMG complied with its obligations under the Act.
ASIC claimed Mr Forrest knew that there was a material difference between what the market had been told and what actually appeared in the agreements, but did nothing to correct the position and instead continued making misleading statements over the six month period – the true content of the agreements was not disclosed until March 2005.
ASIC also claimed the alleged conduct of FMG and Mr Forrest resulted in the market being seriously misled as to the true status of FMG’s project for over six months.
On 23 December 2009 (see 09-268AD), the Federal Court in Perth dismissed ASIC’s proceedings.
On 4 February 2010 (see 10-13AD) ASIC announced it would appeal the Federal Court’s decision of 23 December 2009.
On 18 February 2011 (see 11-26MR) the Full Court of the Federal Court by a unanimous decision upheld ASIC’s appeal against the decision of the Federal Court to dismiss ASIC’s civil penalty proceedings against Fortescue and Mr Forrest. The Full Court found that:
FMG contravened s1041H of the Corporations Act in that FMG's ASX announcements, media releases and investor presentations about the framework agreements were misleading and deceptive.
FMG contravened s674(2) of the Corporations Act as it failed to correct the misleading statements it had made to the market.
Mr Forrest breached his duties as a director in contravention of s180(1) of the Corporations Act and breached s674(2A) of the Act for his involvement in FMG's contraventions of the Act.
In March 2011, Fortescue and Mr Forrest filed special leave applications in the High Court to appeal the Full Court of Australia’s 18 February 2011 decision.