Andrew Forrest has won his six-year legal battle against Australia’s corporate regulator after the High Court this morning cleared the billionaire founder of Fortescue Metals Group of misleading investors.
In a unanimous judgment handed down in Canberra this morning, the High Court held FMG and Mr Forrest had not contravened the Corporations Act in connection with public statements about agreements between Fortescue and three Chinese state-owned entities to build a Pilbara iron ore project.
The ruling by the nation’s highest court brings to a close a six-year fight by the Australian Securities and Investment Commission which had threatened Mr Forrest’s future in running Fortescue and millions of dollars in fines.
ASIC had accused Mr Forrest and FMG of misleading investors in 2004 by claiming in public statements that the agreements were legally binding when they were only “framework agreements” which would pave the way for firmer deals between the parties and would not be enforceable under Australian law.
The regulator started civil action in March 2006 and lost its first case after a ruling by Federal Court Justice John Gilmour in December 2009.
But an appeal by ASIC was upheld by the full bench of the Federal Court in February last year, which concluded that because the agreements would not be enforceable under Australian law, it was misleading or deceptive to describe them as “binding” contracts.
The Full Court made declarations that Fortescue had engaged in misleading or deceptive conduct and contravened its continuous disclosure obligations.
The appeal judgment also ruled that Mr Forrest had contravened his continuous disclosure obligations and directors’ duties.
Today, four members of the High Court held that the statements made by FMG and Mr Forrest represented that Fortescue and the Chinese state-owned entities had entered into agreements that each intended to be binding.
“This representation was neither false nor misleading,” a High Court judgment summary released this morning said.
“There was no evidential basis for assuming that a person hearing or reading these statements would understand that the parties had entered into agreements that would be enforced by an Australian court according to Australian law should a dispute ever arise between them.”
The court also ruled that because the statements were neither misleading nor deceptive FMG and Mr Forrest had not failed to meet their obligations under the Corporations Act.
The ruling set aside the Full Court declarations and reinstated Justice Gilmour’s decision.
FMG deputy chairman Herb Elliott said the decision "brought to an end an eight-year long process that ASIC thought was apporiate but was ultimately determined to be wrong".
He said the ASIC allegations were "an expensive distraction".
Fortescue was awarded full costs for the Federal Court, Full Federal Court and High Court proceedings.
Shares in FMG were placed in a trading halt pending the decision. They closed
up five cents, 1.43 per cent, at $3.55.