Forrest v Australian Securities and Investment Commission

The High Court of Australia heard appeals concerning allegations of misleading or deceptive conduct and continuous disclosure breaches by Fortescue Metals Group Ltd (Fortescue) and its chairman, Andrew Forrest. The Australian Securities and Investments Commission (ASIC) alleged that public statements made by Fortescue regarding agreements with Chinese state-owned entities to build, transfer, and finance mining infrastructure were misleading or deceptive, and that Fortescue failed to disclose the actual terms of these agreements as required by continuous disclosure rules. ASIC also alleged that Mr Forrest breached his director's duties by allowing Fortescue to engage in such conduct.

The central legal issues before the High Court were whether Fortescue's public statements about entering into binding agreements constituted misleading or deceptive conduct under s 1041H of the Corporations Act, and whether Fortescue was obliged to disclose the full terms of these agreements under s 674 of the Corporations Act. The Court also considered whether Mr Forrest breached his director's duties under s 180(1) of the Corporations Act, contingent on Fortescue's contravention of the other provisions. A further procedural issue arose regarding the appropriateness of ASIC's pleading of numerous allegations in the alternative.

The High Court reasoned that the question of whether a statement is misleading or deceptive depends on what an ordinary or reasonable member of the audience would understand it to convey, requiring a careful analysis of the specific facts and evidence. The Court rejected ASIC's submission that a company must always publish the entirety of an agreement to avoid contravening disclosure obligations, finding this impractical and not supported by the legislation. The Court determined that ASIC had not discharged its burden of proof in establishing that Fortescue's statements were misleading or deceptive under s 1041H, nor that Fortescue had breached its continuous disclosure obligations under s 674. Consequently, the claim against Mr Forrest for breach of director's duties also failed.

The High Court allowed the appeals, setting aside the orders of the Full Court of the Federal Court of Australia. The Court ordered that ASIC's appeal to the Full Court be dismissed with costs. Special leave to cross-appeal was granted but subsequently dismissed with costs.