AFTER three trial defeats in a month, the corporate regulator was left pondering late last year as to whether it would appeal the Federal Court decision to throw its claim again Fortescue Metals Group.
Its consideration comes in the wake of a stern warning from the court that allegations of dishonesty against company directors should only be made where there is a reasonable evidentiary basis for them.
The Australian Securities and Investments Commission (ASIC) has lost its case claiming that Fortescue, and its chief executive Andrew Forrest, had misled shareholders by claiming in 2004 that "framework agreements" with Chinese buyers were binding.
Justice John Gilmour awarded costs to Forrest and the company after throwing out the civil proceeding. It is anticipated that those costs will exceed $10 million.
This is the third blow for ASIC in recent months, after NSW and Victorian courts respectively threw out high-profile claims against One.Tel founder Jodee Rich and former AWB boss Andrew Lindberg.
While ASIC has said it intends to appeal the two earlier decisions, it is yet to signal what it will do about the latest defeat.
In the long-awaited decision, which took seven months to be handed down, Justice Gilmour said in a 299-page judgment that ASIC's allegation that Forrest had no legal basis to make the 2004 claim about the agreements "surprising".
"It is difficult to discern why ASIC ran a case alleging that [Fortescue's] board could not have made the disclosures it did if it had obtained competent legal advice," he said.
"In fact FMG did have the benefit of competent professional legal oversight and advice in relation to its agreements, including the framework agreements," Justice Gilmour said.
Had ASIC been successful in its claim against Fortescue, Forrest would have been banned as a director of the company in which he holds a $4.3 billion stake.
The maximum penalties that FMG and Forrest could be ordered to pay, had ASIC been successful, was $6 million and $4.4 million respectively.
But as ASIC considers whether it will move ahead with an appeal, it may consider the warning from Justice Gilmour regarding its own conduct. The judge said that allegations of dishonesty against company directors are "self evidently" serious and are likely to attract the attention of the media.
"That they are made by the corporate regulator may injure the business of the particular company and will tend to adversely affect the reputations of those against whom the allegations are made," he said.
"It is important that allegations of dishonesty should be made only where there is a reasonably evidentiary basis for them," Justice Gilmour said.
He said that unless the allegations are withdrawn, the people accused have to wait until trial before they can be assessed. The directors, meanwhile, "have to live and work in their shadow". In the case of Fortescue, the court proceedings have been running for more than three years.
Meanwhile, as ASIC considers where to go from here, the court will resume to hear submissions on the handling of costs for the case, which involved about 20 lawyers, including several QCs.
Forrest himself had engaged the services of Allan Myers QC, Australia's wealthiest lawyer. Fortescue, meanwhile, used John Karkar QC, while ASIC used Neil Evans QC.