Australian Securities and Investments Commission v TerraCom Limited

In the matter of Australian Securities and Investments Commission v TerraCom Limited, the Australian Securities and Investments Commission brought an action against TerraCom Limited and several of its directors and employees, alleging violations of the Corporations Act 2001 (Cth). The ASIC claimed that TerraCom had made misleading statements in announcements to the Australian Securities Exchange (ASX), specifically that there were four 'exoneration representations' and three 'no customer complaint' representations that were allegedly false or misleading. The defendants denied these allegations and contested the claims in the Federal Court.

The court was required to determine whether the defendants had indeed contravened section 1309(2) of the Act by making misleading statements to the ASX. This involved examining whether the identified representations were indeed false or misleading. The court further examined if the two 'no customer complaint' representations were misleading by omission, considering whether certain information was expressly included in the announcements. Additionally, the court addressed whether the directors had contravened section 180(1) of the Act by failing to take certain steps following reports from PricewaterhouseCoopers and ALS.

The court found that only two of the alleged representations were established, but neither was found to be false or misleading. It was determined that one outstanding test result was immaterial and that an enquiry by a customer did not amount to a complaint. Therefore, the court concluded that neither of the established representations was false or misleading. Regarding the directors' conduct under section 180(1), the court found that the allegation of failure to make further enquiries following the reports was unsubstantiated. Furthermore, the court held that the non-executive chairman's failure to read the investigation report did not constitute a contravention of section 180(1) as the duty did not arise in the circumstances.

The court dismissed the case against the second to fifth defendants and ordered the filing of affidavits and written submissions regarding costs by specific dates. Entry of orders was to be dealt with in accordance with Rule 39.32 of the Federal Court Rules 2011.