Know your audience: The final chapter in ASIC's prosecution of Fortescue and Forrest

Forrest v Australian Securities and Investment Commission & Anor; Fortescue Metals Group Ltd v Australian Securities and Investments Commission [2012] HCA 39

Judgment date: 2 October 2012

Jurisdiction: High Court of Australia1

In Brief

On 2 October 2012 the High Court handed down its much anticipated decision in the appeal of Fortescue Metals Group Ltd (Fortescue) and Andrew Forrest, chairman and chief executive, against the decision of the Full Court of the Federal Court. In granting the appeal, the High Court unanimously held that Fortescue and Mr Forrest did not engage in misleading and deceptive conduct in contravention of the Corporations Act 2001 (Cth) in connection with public statements. In determining whether a statement is misleading or deceptive, the Court will first look to identification of the target audience and the message conveyed to that audience. While it was expected this decision would clarify continuous disclosure obligations and directors' duties, these issues were not addressed in detail and further scope for interpretation remains. Background

The proceedings relate to information Fortescue gave the Australian Stock Exchange Limited (ASX) and the public in 2004 and 2005 regarding agreements with China Railway Engineering Corporation (CREC), China Harbour Engineering Company (Group) and China Metallurgical Construction (Group) Corporation to build, finance and transfer the railway, port and mine components of Fortescue's proposed Pilbara Iron Ore and Infrastructure Project in Western Australia.

The most notable components of the Framework Agreements were as follows:

The parties were to jointly develop and agree on certain matters including a General Conditions of Contract suitable for a Build and Transfer type document. Payment terms were to be included in the General Conditions of Contract. The agreements became binding on approval of the Board of Directors of both CREC and Fortescue. The...