Forrest wins High Court appeal

Updated

Fortescue Metals chairman Andrew Forrest has won his High Court appeal against a Federal Court decision that would have seen him banned as a company director.

The Australian Securities and Investments Commission (ASIC) argued Fortescue, and its then chief executive Mr Forrest, had misled investors by announcing three deals with Chinese companies, when all that had been reached were framework agreements.

ASIC won the case in front of the full bench of the Federal Court, which found that Mr Forrest had misled investors with the announcements to the market about mining developments in the Pilbara.

The full bench of the Federal Court in that ruling overturned a previous finding by a single judge of the court that the corporate regulator had not made out a case that Mr Forrest misled investors.

However, the High Court has unanimously reversed the full Federal Court decision and backed the findings of the original judge.

Four of the five judges who heard the case found there was no evidential basis for assuming that a person who read or heard Fortescue's statements describing the agreements as "binding" contracts would think that they must be enforceable in an Australian court.

Furthermore, the court found that at the time the deals were made the parties to them all treated the agreements as binding.

Because the statements were therefore not misleading or deceptive, the court found neither Fortescue nor Mr Forrest had breached their obligations under the Corporations Act.

Fortescue's deputy chairman Herb Elliott says the court win is a major vindication after an eight-year process which ASIC thought was justified, but the court found to be wrong.

"ASIC's allegations have been an expensive distraction," he said in a statement.

"We can now focus our full attention to ensuring the continued success of Fortescue Metals Group for many years to come."

The decision means Mr Forrest will be able to continue as chairman of the company he founded, and brings to an end a six-and-a-half-year legal battle.

Fortescue says it has been awarded costs against ASIC from each of the three court actions.

ASIC says the loss will force it to assess its continuous disclosure rules.

"ASIC brought the case because it raised issues of integrity of the capital markets," deputy chairman Belinda Gibson said in a statement.

"Compliance with continuous disclosure goes to the heart of ASIC's strategic priority of fair and efficient financial markets.

"Observation of our continuous disclosure laws is essential, not only for investors but for the broader capital markets."

ASIC says the judgement against it raises discussion about what the market would consider to be a significant statement about the nature of an agreement.

It says the judgement also raises the issue of what is necessary to ensure the market is properly informed .

It says it is carefully considering both points.

Fortescue Metals shares had risen 2.3 per cent to $3.58 by 12:58pm (AEST) after coming off a trading halt following the decision.

Topics: iron-ore, regulation, corporate-governance, company-news, business-economics-and-finance, courts-and-trials, australia, wa, karratha-6714

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