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High Court grants Fortescue appeal

The High Court has granted Fortescue Metals leave to appeal the Full Federal Court decision in the civil penalty proceedings bought by ASIC.

user iconThe New Lawyer 17 October 2011 The Bar
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THE High Court of Australia has granted Fortescue Metals leave to appeal the Full Federal Court decision in the civil penalty proceedings bought by ASIC against the company and chairman Andrew Forrest. 

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," Gibson said.

Forrest said the High Court decision vindicated the company's action to strongly defend the case over the past six years. 

A hearing date for the appeal has not been set.

The appeal will come after the Full Court's decision on 18 February by a unanimous decision that Fortescue had engaged in misleading and deceptive conduct and contravened the continuous disclosure provisions of the Corporations Act. It said Forrest was involved in those contraventions and breached his duties as a director.

ASIC's case 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.

ASIC also alleged Forrest was involved in FMG’s alleged contraventions and 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.

ASIC claimed 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.

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