Clarity at last? the High Court upholds quality of Fortescue Metals' disclosure

Focus: Forrest v Australian Securities and Investments Commission [2012] HCA 39 Services: Commercial Industry Focus: Property The High Court has unanimously held 1 that announcements by Fortescue Metals Group Ltd ("Fortescue") that Fortescue had entered into 'binding contracts' with state-owned Chinese entities were not misleading or deceptive because the statements accurately conveyed the parties' understanding and did not equate to an opinion as to how the courts might treat the agreements. Accordingly, Fortescue did not breach continuous disclosure requirements, nor did the Chairman/CEO breach his duties as a director to act with due care and diligence.

The facts

In 2004, Fortescue made various announcements by way of releases to the ASX and media concerning 'binding contracts' it had made with state-owned Chinese entities to build and finance a railway, port and mine project in the Pilbara region of Western Australia. The "Framework Agreements" were expressed to become binding upon board approval, and also contemplated that the parties would later enter into more detailed agreements reflecting the terms of the Framework Agreements.

In 2005, an article in the financial press suggested that the contracts were not binding.

ASIC's allegations

In 2006, ASIC commenced proceedings against Fortescue...