Forrest v Australian Securities and Investments Commission & Anor; Fortescue Metals Group Ltd v Australian Securities and Investments Commission
[2012] HCATrans 84
[2012] HCATrans 084
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Perth No P44 of 2011
B e t w e e n -
JOHN ANDREW HENRY FORREST
Appellant
and
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
First Respondent
FORTESCUE METALS GROUP LTD (ACN 002 594 872)
Second Respondent
Office of the Registry
Perth No P45 of 2011
B e t w e e n -
FORTESCUE METALS GROUP LTD (ACN 002 594 872)
Appellant
and
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
First Respondent
JOHN ANDREW HENRY FORREST
Second Respondent
FRENCH CJ
GUMMOW J
HAYNE J
HEYDON J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON FRIDAY, 30 MARCH 2012, AT 10.04 AM
(Continued from 1/03/12)
Copyright in the High Court of Australia
__________________
FRENCH CJ: Yes, Mr Young.
MR YOUNG: If the Court pleases ‑ ‑ ‑
FRENCH CJ: I am sorry, before you start, Mr Young. I think last time you gave us an estimate of up to three hours. We would expect you to finish before lunch so that we can finish the balance of the appeal today.
MR YOUNG: If your Honour please. If the Court pleases, I was addressing submissions to clause 1.2 of the framework agreement at the adjournment. There are several further points we wish to make. The clause is in the framework agreement under tab 1 of the key documents. The first is that the provision does not identify or provide for the appointment of the third party jointly by FMG and CREC; rather it is part of the scope of the work of FMG to instigate the relevant review.
In our submission, and having regard to the submissions I made on the earlier part of the hearing, no reasonable commercial party would understand the language of clause 1.2 as providing for a third party to determine, by way of dispute resolution, either the value of the works or the schedule for the works or the identification of the works. Below, that is to say at trial, it was not contended by FMG that clause 1.2 was a third party determination provision.
That appears from the trial judge’s reasons at paragraph 279, to which the Court has already been taken. It also appears from the defence where the plea is quite inconsistent with the argument first raised before the Full Court. The defence is in volume 1, relevantly in paragraphs 3(c), (d) ‑ ‑ ‑
HAYNE J: What page?
MR YOUNG: I am sorry, your Honour, 144. Paragraph 3(d) of FMG’s defence. That is preliminary to the point I am going to make, but it shows how it was put, an agreement to jointly develop and agree. As to a peer review it was simply pleaded, in paragraph (d), as work to be undertaken by FMG and, similarly, in paragraph (g), at the foot of 145 to the top of 146.
The next point is that the cases relied upon by FMG - Fortescue, that is - in relation to clause 1.2, do not assist. Perhaps the prime example of the case they relied upon is Booker 149 CLR 600. That and the other cases were all cases of explicit third party determination by an agreed arbitrator. It appears from the headnote in Booker.
The relevant clause in the case provided for a fixing of a fair rent in an ongoing lease when an option was exercised at an amount not less than that payable than the last year of the first term. So the prior performance and the nature of the exercise provided standards to be applied by the independent third party. So it is an explicit third party determination provision. The court endorsed the proposition that you need agreement upon all of the essential matters. That is apparent at 604, last paragraph, to the top of the next page.
All of the other cases relied upon by Fortescue are similar. They are explicit third party determination provisions usually in the context of an ongoing contract where there is a need to determine, say, a rent when an option is exercised and the contract provides standards to be applied by the third party.
The next point concerning the contract issue I wanted to make, concerns clause 3 which is the provision concerning the structure of a price, if and when it might be agreed. It is simply described then “merely a structure which is of no assistance whatsoever in relation to the existence of an agreement to undertake the works unless and until the parties agree on the value and the identification of the works and other essential matters” and because those essential matters are not agreed - references to practical completion, for instance, and performance bonds were at large - the parties remained in a position where they could debate any manner of defining those provisions or contest their application at all, as later events demonstrate.
The Court may recall I took the Court to a Business Sunday interview by Mr Forrest in which he asserted publicly that the contract provided that there was no payment until 90 per cent of design specifications had been achieved. There is no reference to that in the framework agreement. Later, the Court will see from the advanced framework agreements that different views were put forward about what is meant by practical completion. The parties were at large, in our submission.
Mr Jackson also relied upon another line of cases which included Godecke v Kirwan, GR Securities, Anaconda itself and Pagnan to advance the proposition that it was possible to leave certain matters open for further negotiations. All of those cases are cases in which the parties had agreed upon the essential components required for the existence of a binding agreement including price, subject matter, parties.
Pagnan is a case like that as page 613 illustrates. So, too, are the others. Godecke v Kirwan 129 CLR 629 was most certainly a case like that. It was a third party determination process where the Court held the contract itself provided a standard that the third party could only fix terms which were reasonable and not inconsistent with the essential terms already agreed. The holdings I just referred to are in two passages, 642 to 643 and 645 to 647.
All of those cases illustrate a point to this effect. Where the essential terms have been agreed, the parties can, of course, indicate that they are going to continue negotiations in relation to other terms provided those terms are not inconsistent with the essential or core terms they have already agreed. That is, I think, what ‑ ‑ ‑
GUMMOW J: What is the criterion to assess essential?
MR YOUNG: It is what the law regards as essential which ‑ ‑ ‑
GUMMOW J: We know. What is the legal criterion for regarding something as essential?
MR YOUNG: It has been determined in cases such as Hall v Busst that it requires agreement upon parties, subject matter and price, at the very least.
GUMMOW J: It is the sale of land, is it not?
MR YOUNG: It was the sale of an island with improvements. That was, for instance, a view endorsed in the Booker Case to which I referred. This requires identification of subject matter, that is to say the nature of the works, it requires the value or price of the works to be determined, and without at least those two matters there cannot be an agreement recognised by the law, it is a mere agreement to agree.
The point I just made about further matters beyond the essential terms being capable of further negotiation provided they are not inconsistent is a point made in Godecke v Kirwan itself. It is made in GR Securities by the Court of Appeal in New South Wales. It is the exact opposite of what the evidence demonstrated occurred here. There was not a negotiation about additional matters.
The further negotiations related to the allegedly already agreed matters of value, practical completion, works, performance bonds, third party reviews, et cetera. So the cases do not reach the kind of situation that Mr Jackson was contending for. In relation to the next contractual issue I want to take up, which concerns the reliance by Fortescue on the recitals, our submission is that the Full Court was correct in its analysis of that matter. The recital merely takes one back to the effective parts of the agreement. The words are “now wish to evidence their agreement”. So you look to what follows to see what in fact the recital is referring to.
Now, can I go for a moment to Chief Justice Keane’s analysis about the recitals at paragraphs 155 to 159? It commences at page 3584. Can I focus particularly for a moment on paragraph 157? His Honour’s reference to the question being whether you look to the “operative terms” to see what agreement has been made, or whether what was flagged in the recitals was “left for later agreement”, is a shorthand reference back to what his Honour had earlier said at paragraph 135 of the judgment.
His Honour’s conclusion, having analysed the contractual matters, was that the critical matters were explicitly left to be agreed between the parties and that being so, as his Honour says, “The recitals afford limited assistance”. The Chief Justice’s analysis was criticised by Mr Jackson on the basis that he had narrowed the principle stated by Sir Anthony Mason in Ansett that follows in the next paragraph.
In our submission, that is not the case. What Chief Justice Keane was doing was drawing attention to the inconsistency between the proposition that the agreement is to be found in the recital, and the language of clause 1.1 where the matters were explicitly left for the parties themselves to agree in future. There is an indication of contrary intention. The asserted reliance on the recital is inconsistent with what follows and therefore it does not fall within the kind of case described by Sir Anthony Mason.
Now, on the contract aspect of the argument there is one further matter I wanted to draw attention to. It concerns some differences in the CHEC and CMCC framework agreements, when compared to the CREC framework agreement. If the Court goes to the key documents folder, the CHEC agreement is under tab 2. I have already drawn attention to the loose description of the works in A, that is port‑related works, but I omitted to refer to recital C. Under recital C:
CHEC will confer with the Chinese government to determine whether CHEC will also be authorised to carry out the works –
So it has no authority to carry out the works, according to the recital, another element of incompleteness. Clause 1.1 is ‑ ‑ ‑
FRENCH CJ: That recital does not appear in the CMCC agreement, does it?
MR YOUNG: In neither of the other two, your Honour. Paragraph 1.1 ‑ ‑ ‑
HAYNE J: Does recital C, with its reference to “the works associated with the port infrastructure” suggest that there is some distinction being drawn between that description and what is the earlier defined description of “the Works”?
MR YOUNG: Port‑related works. It is impossible to discern, your Honour. We would say no. When I said impossible to discern, one cannot discern, on the face of a document, a distinction between port‑related works and works associated with port infrastructure. Objectively, they seem to be one and the same thing. 1.1 does not appear in any of the other agreements. It is also vague and uncertain in its reference to nominated “alliance/joint venture” partners “to supply certain” unidentified “port related equipment”. The first bullet point is expanded to accommodate that reference and the works are only sort of described by reference to categories in 2.1.
The CMCC agreement is under the next tab, tab 3. It does not have the features I have just mentioned, but I did not previously draw attention to 2.1. In listing the categories of works 2.1 leaves it open as to whether there is to be one crushing plant, more than one crushing plant, more than one process plant. So the absence of agreement upon the precise subject matter is apparent, on the face of that clause. That concludes what I wish to say about the contract aspect of the matter we, of course, adopt; the fuller argument is in our written submissions.
FRENCH CJ: There is one other difference, I think. I do not know that anything particularly turns on it - in the CHEC agreement under the heading “Schedule” in clause 4, and that was the addition of the words “subject to satisfactory geological data”.
MR YOUNG: Yes, your Honour is right. I now wish to turn to the submissions that were advanced under the heading of “A Reasonable and Honest Belief” by Fortescue. We note at the outset that Fortescue made a single set of submissions under that heading and said that they equally addressed the requirements of section 1041H, 674 in its various subsections, and in the same way, Forrest used the same set of submissions to address section 180 of the Corporations Act.
In essence, Fortescue’s case, like the case it put below in the Full Court, attempts to support the findings of the trial judge. I will go through this in some detail, but the Full Court rejected those findings comprehensively. There was a preliminary point, though, I wish to make. The argument that there is an issue of reasonable belief that can be expressed in the same way, and covering all of those sections, is unacceptably abstract. Indeed, the case mounted by Fortescue is abstract in two ways.
First, it is based on an assumption that Fortescue and Forrest actually held underpinning beliefs or opinions co‑extensive with the ASX announcements. I have referred to those paragraphs where that is the trial judge’s approach. For the record, they are – I will not give the full references – paragraphs 41, 59, 253, 684 and 686 where that is the analysis that is undertaken. Nowhere does his Honour consider whether, in fact, Fortescue and its relevant officers including, in particular, Mr Forrest, held beliefs supporting what was conveyed to investors and, for instance, the trial judge never considered all of the documentary evidence inconsistent with a conclusion that the beliefs that were held were not supportive of what was conveyed to investors.
HAYNE J: What is the distinction you are making?
MR YOUNG: The first point I am making, your Honour, is there was simply an assumption that if Fortescue made public statements, it must have held an opinion sufficient to support the public statements. Ultimately, his Honour boiled down his analysis, though, by looking at only one proposition – that is, the proposition that there was an underlying opinion to the effect that there were binding agreements to build and finance.
Can I answer your Honour a little bit fully in a moment when I make my other point? The second way in which the whole approach is abstract is that the search for a reasonable belief is divorced from the statutory requirements and they are not the same when you move from section 1041H to 674 to section 180(2).
Now, to return to your Honour Justice Hayne’s question, if I take section 1041H, in our submission, the issue is this. If opinions or if the announcements would have been understood as conveying opinions to investors it is necessary to identify the particular opinion that was so conveyed and would be so understood by investors and then to address the question, did Fortescue have a reasonable basis for that opinion? That is not the way in which the trial judge considered the matter. He simply made an assumption that there must have been an underlying opinion.
Can I give your Honour this example? Can I do it by reference to a document we have not been to because it is perhaps a useful way of illustrating it? It is the November presentation, key document tab 14. It is page 1926. All of the presentations contain this particular claim. It is the second bullet point 1926:
CREC, CHEC & MCC to assume 100% completion risk -
Now, there was a similar statement in 23 August ASX announcement that CREC was to assume full risk under a fixed price contract. Indeed, there it was said under the terms of the contract CREC assumes 100 per cent risk. If one is to properly apply the statutory test, one needs to proceed in the following manner. The question is what did that statement convey to investors?
Our first proposition is it conveyed the fact that the agreement contained terms that the companies assumed 100 per cent completion risk but leave that to one side and assume it conveys an opinion to that effect. The question required by the statute is, did Fortescue and its relevant directors, including Mr Forrest, have a reasonable basis for asserting that under the design, construct and finance contract, he believed they were to assume 100 per cent completion risk. It was never analysed in that fashion. Indeed, various aspects of the announcements were never analysed to see whether the particular aspect was supported by an opinion or belief that was reasonable.
HAYNE J: How much of that is attributable to the fashion in which ASIC pleaded its case with alternative piled upon alternative piled upon alternative?
MR YOUNG: Well, in our submission, it is not attributable to that, your Honour. The case was presented more simply than the complications of the pleading. Secondly, your Honour, the alternative concerning reasonable and genuine belief was added by way of amendment in about November 2008. It was added after discovery in circumstances where there were documents that indicated that beliefs were not held supporting what was asserted, even if you regarded those assertions as opinions.
Now, unless it was fully pleaded, and it can only be pleaded as an alternative because the primary case was that facts were conveyed, but if it was likely to be in debate, as it was, that certain statements only conveyed opinions, the only fair way of approaching it if it was going to be said in due course that there was no basis for those opinions, was to plead and particularise it, otherwise, this aspect of the case would never have been the subject of claims seeking relief that the statements were misleading, even if considered to be opinions, because they lacked a basis.
Can I add to this, your Honour, that the Fortescue pleading I went to a moment ago pleaded the interpretation of the agreement. The Court saw that. It did not plead that the agreement conveyed opinions. That first was deployed by Fortescue in its opening. Now, without the plea that we made and fairly pleaded that we contended there was evidence there was no basis if regarded as opinions, that matter would have lain beneath the surface until the opening. If it was opened in that fashion we would have sought leave to plead the alternative case we had earlier pleaded.
HAYNE J: But did not ASIC go on its pleading with an alternative case, fact or opinion?
MR YOUNG: Yes. Its primary case was fact.
HAYNE J: ASIC never nailed its colours to one of those masts.
MR YOUNG: Well, they were always presented as alternatives, your Honour, but it did say that its primary case was that fact was conveyed, but if that is wrong and to the extent that opinions were conveyed, they lacked a basis. Unless those matters were alleged in the alternative in the statement of claim, there would be no claim for relief for that aspect of the statement which was ultimately characterised as an opinion, if that were to be the way it unfolded. There was no equivalent of section 51A.
If ASIC was to seek relief on the basis that if characterised as opinions, these opinions lacked a basis, ASIC had to make the allegation and set out to prove the absence of the basis, and it had to do so in its statement of claim. It could not do that in a reply. It was seeking relief. It is the consequence, your Honour, of the fact that ASIC bears the onus and it is also the consequence of the fact that the particular misleading character depends on a characterisation of what is conveyed.
There will often be cases where there are two alternatives. In a section 52 case, the plaintiff can rely on section 51A to say if the defendant wants to contend it is an opinion the defendant bears the onus and needs to plead it, but not in the context of section 1041.
HAYNE J: But at bottom, should not the regulator in taking a penalty case nail its colours to a mast? Should not the regulator go forward saying, “This is misleading or deceptive because”?
MR YOUNG: With respect, no, your Honour. ASIC took the view that it had documentary evidence that if characterised as an opinion there was no basis for it. It took a proper and appropriate and fair course in presenting both ways in which it contended that the statements were misleading. Can I return to the point I was making about the way in which the reasonable belief case presented by Fortescue was divorced from the statutory requirements? I have mentioned section 1041H. It becomes even more palpable when you turn to section 674 because, there, the requirements of the section do not depend on belief at all.
I will develop this in detail but section 674 postulates an objective test concerning the possession of information – nothing about belief – an objective test concerning the possession of information. Is it possessed or ought it reasonably to be possessed by executives? Likewise, section 6742(b) has its own particular statutory requirements, as does section 180(2). They are not properly addressed by this generalised case about reasonable belief. You need to adhere to the particular statutory requirements under each of the sections.
Now, can I make this point concerning the trial judge’s approach to honest and reasonable belief? Moving beyond the point that they were based upon an assumption that beliefs must have been held, his Honour identified three planks for that finding which he repeatedly emphasised. They are addressed, firstly, in the summary commencing at paragraph 44, page 3044.
The first is the “benefit of competent professional legal oversight and advice in relation to” the agreements. That point is developed in paragraphs 44 down to 49. The second matter, repeatedly emphasised, is at the foot of page 3045 and the top of 3046. It is Mr Forrest’s knowledge of the Anaconda Case. The third matter is CREC’s approval of the terms of the 23 August media release referred to in paragraph 50 at page 3046, and the lack of any disavowal from CHEC and CMCC who only obtained the media release after it was publicly available. They are the three matters his Honour constantly emphasises as the foundation for his finding of reasonable belief.
His Honour comes back to those three matters at paragraph 70 at page 3051 or at least two of them, at about line 16. Then at 353, which is at page 3136 - that again is two of them and then at 904 which is at page 3280 in the appeal book.
Now, there is another passage where the trial judge identifies some other matters but they are not the matters that he places primary reliance upon. That is page 3137, paragraph 357. The list at 357 includes the matters I have just mentioned but in addition it includes (c) and (d), internal and external communications; (e) a position adopted by certain FMG executives and then the advanced framework agreements and (g) is a comparison of the language of these framework agreements with the language of the letter of intent with somebody else.
They are rightly, in our submission, described as miscellaneous matters of no weight when one examines them and it is clear the trial judge treated them as not in the same category as the primary matters he relied upon for his finding of reasonable belief.
GUMMOW J: Now, Mr Young, at some stage it will be useful to know what your response is to Mr Myers’ submissions at paragraph 48, where he says:
In this case, an investor reading the press release would be primarily concerned with one matter regarding the representation: do both parties agree with what is being represented? The subtleties of contract law would be largely irrelevant -
et cetera. Is that not an answer to this attention to Godecke v Kirwan and Hall v Busst and the rest of it?
MR YOUNG: No, your Honour. The investors would be concerned with the actuality of what was agreed.
GUMMOW J: It depends on what you mean by actuality.
MR YOUNG: I mean what was contained in the agreement. Was it an agreement that contained provisions by which there were commitments or undertakings by the Chinese to do what was claimed? Parties would not ‑ ‑ ‑
HAYNE J: That is a proposition which can be again understood in a number of ways. Did the Chinese parties consider themselves bound? That is not the case that is pleaded. The case that is pleaded is “did not have the legal effect”.
MR YOUNG: Well, no, that is not the only case pleaded, your Honour.
HAYNE J: Yes, exactly, it is not the only case pleaded.
MR YOUNG: The case pleaded did not have that legal effect. There were no terms or provisions containing undertakings or commitments to build and finance. There were no prices claimed. There was no agreement that full risk would be borne by the Chinese, as claimed. They were all importance matters for investors. What the investors were not told by any of the releases was that the critical matters remained for further discussion; development and agreement. That was never conveyed, but that was, in fact, what the terms said and that was why what was asserted was false and misleading.
FRENCH CJ: Would it have made any difference if instead of using the term “binding” the word “commitment” had been used, that the Chinese companies had made commitments, in terms of ‑ ‑ ‑
MR YOUNG: Well, we do not think, your Honour, that the word “binding” is or should be regarded as central to what is being communicated to investors. The word “commitment” was used in the 5 November release, repeatedly. What investors were not told and what they were entitled to know was that the parties had agreed on a framework under which they were to develop and agree. That was not revealed, and had that been revealed the situation conveyed to investors would have been very different, fundamentally different from that which, in fact, was conveyed. They would have known that further negotiations remain before you can say anything about price and allocation of risk.
FRENCH CJ: Now, there is obviously an overlap between the 674 case and the misleading and deceptive case, but the non‑disclosed information for the purpose of the 674 case in relation to the CREC agreement, I think, is that set out at paragraph 136(a), (b) and (c) at pages 84 and 85 of volume 1 that is in the pleading?
MR YOUNG: Yes, your Honour.
FRENCH CJ: One of those elements of information is that the CREC framework agreement had the legal effect which you have asserted in paragraph 20.
MR YOUNG: Yes, that was amongst the pieces of information.
FRENCH CJ: Well, I am just looking at the definition of CREC information, which appears at the bottom of 85:
the information set out in the whole of, alternatively separately in each of, paragraphs 136(d) to 136(f) above is called “the [CREC] Information” –
MR YOUNG: But it is the whole or alternatively each separate component is ‑ ‑ ‑
FRENCH CJ: Yes, (a) to (c).
MR YOUNG: There were other pleas ‑ ‑ ‑
HAYNE J: At some point you might tell me how many permutations and combinations there were in this document, Mr Young? I suspect they run into the thousands, would they not?
MR YOUNG: I have not attempted the exercise, your Honour.
HAYNE J: Where most conveniently do I find the pleading that it was misleading or deceptive not to tell investors that critical matters remained for further agreement?
MR YOUNG: In paragraph 28, your Honour, read with paragraph 33. Perhaps I should have said paragraph 30 and 33, your Honour. Paragraph 30 is about the 23 August media release and it is alleged to be misleading for the reasons given in paragraph 33.
HAYNE J: I had read paragraph (d) of 33 and paragraph (d) of 28 as allegations of deceit, not as allegations of the respect in which the document misled or deceived, but you say it is a separate allegation, do you, of the respect in which it misled or deceived?
MR YOUNG: No, I was referring to 33(a), your Honour.
HAYNE J: Yes.
MR YOUNG: The first contention in 33(a) is that the agreement “did not state that CREC would . . . build, transfer and finance”.
HAYNE J: Yes. I was directing attention to your statement that it misled or deceived because it did not tell investors that critical matters remained for further agreement, is I think the expression you used.
MR YOUNG: Yes, but that is the effect of paragraph 33(a). The agreement stated that matters were to be further developed and agreed. It did not state that CREC would “build, transfer and finance”. To take another example, if one compares 30(j):
under the terms . . . CREC would take full risk under a fixed price agreement –
The corresponding plea is 33(c), the agreement:
did not “fix” a price and did not state that CREC would . . . take any risk for the Project ‑
Can I move to the reasons why – before I come to the reasons the Full Court gave for rejecting the trial judge’s findings about reasonable belief, can I refer to some general matters that support those findings? They are as follows. First, as the Full Court pointed out, there was no evidence called from any directors or any relevant decision‑maker or from Mr Huston. So, in that respect, there was no evidentiary basis for the conclusions that the trial judge drew, and I will elaborate that. Secondly, there was the significant disparity between the agreements and the announcements about which the Full Court made explicit findings at paragraph 191 at 3595 to 6.
Next, there is the observation I made earlier, and I will not elaborate, that these were announcements by a public company bound by the listing rules, and that was the context in which the messages were being conveyed with all of the consequences that that entails. The next point is that Fortescue’s disclosures were disclosures made without following its own announced protocols for the making of public statements.
There are two documents I would like to go to concerning that. The first is the Fortescue annual report of October 2004 which is in volume 6 of the appeal book at page 2480, the annual report commences. The passage is at 2493. It is under the heading “Audit Committee”. The last point is the protocol concerning ASX statements. So it is the function and duty of the audit committee to monitor “compliance with the Corporations Act and ASX Listing Rules”.
Now, that did not occur in relation to any of these statements and the board expressed concern generally about a lack of adherence to the protocol. That appears in the 3 November minutes of Fortescue in volume 5 of the appeal book. The passage is at 1741v. The failure to adhere to the company’s protocol for ASX announcements has a direct bearing on both the reasonableness of belief for Fortescue and Mr Forrest and matters such as, for instance, 674(2)(b) and the requirement to take all reasonable steps to ensure that there is compliance with the disclosure requirements of the Corporations Act. That was not adhered to.
The next general point I foreshadowed already – I will not elaborate it – it is this. It is clear from the trial judge’s contractual analysis that he applied a standard of reasonable belief along the lines of a faint argument is enough provided it is not unequivocally wrong which is remote from the statutory requirements of the sections we are concerned with. That point is supported by a detailed reading of the way in which the trial judge analyses what matters were arguable about the contract and its completeness.
Now, can I turn to the Full Court’s particular findings about reasonable belief in volume 9. The first point we wish to make is that the Full Court rejected the finding about legal oversight and reliance on legal oversight in a number of passages. The Full Court found there was no evidence of any legal advice or relevant oversight that could be relied upon. In a series of passages commencing at paragraph 67 at 3552, the Full Court sets out at length the reasoning of the trial judge concerning reliance on legal oversight and that being a primary basis for a finding of reasonable belief and in paragraph 67, Chief Justice Keane says at the end, in relation to Anaconda:
there was no evidence that Forrest had the Anaconda decision in mind when he permitted FMG to make the announcements in question.
In paragraph 68:
no evidence that Mr Huston . . . considered the terms of the –
relevant announcements or the three framework agreements:
no evidence that Mr Huston did not, in fact, advise the Board . . . Neither Forrest nor any of the other directors of FMG gave evidence.
You can add Mr Huston to that -
There was no evidence that . . . Forrest regarded the framework agreements as analogous to the agreement at issue in Anaconda.
Then at paragraph 70 - I will refer to this in more detail. That is dealing with the minutes of 22 January, long after the announcements. But as his Honour points out, at the end of paragraph 70, there was:
no inference . . . that Mr Huston gave FMG legal advice supporting the reasonableness of FMG’s public statements at some earlier point in time: there was no evidence which would have supported that inference.
I will come back to those minutes in a little bit more detail shortly. As to Mr Huston’s engagement, can I add this to our submission. Fortescue relies upon an email of 3 October from Mr Forrest, which was about the time of his appointment, asking that employees ensure with Mr Huston complete legal enforceability of future agreements. The document I am not going to go to is volume 4, 1525.
FRENCH CJ: We have been taken to that, have we not?
MR YOUNG: You have, your Honour, yes. 3 October was a date postdating the execution of the CREC agreement and the CHEC agreement. They were executed earlier. Only the CMC agreement was signed later on 20 October. The email was not directed at those framework agreements, that is to say, any of them because the only outstanding agreement was one in relation to which CMCC had said it would only sign an agreement in the same form as the CREC agreement. That is the trial judge’s finding at paragraph 169.
Nothing was done to alter the form of any of the agreements and there is no evidence of anything being done by Mr Huston in relation to the agreements, no evidence that he was asked to advise or ever gave advice. Can I turn to the 22 January minutes? The minutes are at volume 6 of the appeal books, page 2124. The relevant passage cited by the Full Court and by our learned friends is the last paragraph on the page.
That was the subject of a claim for privilege until after ASIC had concluded its submissions. As Chief Justice Keane points out at paragraph 70, the minutes themselves say only – I should explain one other aspect of the minutes. The second half of the page starts by saying:
A question had been raised –
The question was the Chinese saying at a meeting with Fortescue in January it is only a memorandum of understanding. The trial judge refers to that – and I will not go to this paragraph – at paragraph 381 at 3143 to 3144. So the only issue that had arisen was it is only an MOU, it is not binding at all. The only relevant response from Mr Huston is in the last paragraph. Mr Huston made reference to the fact that:
the obligations that had been specified . . . and the fact that they indeed could be determined through the judicial system to be binding -
and a reference to Anaconda. So there is a tentative observation based on Anaconda that the relevant agreements could, indeed, be determined through the judicial systems be binding. That does not address the content or nature of the obligations assumed. It does not address the question binding to do what and it does not address the correspondence between a proper legal analysis of the agreements and the ASX announcements.
The minutes do not support any inference that Mr Huston gave earlier advice to the contrary, we would say. The issue being addressed is effectively a different issue than the one that is important in the context of this case. Were there binding obligations to build and finance?
Fortescue itself never relied upon any contention that legal advice was obtained or that it relied upon the benefit of legal advice or oversight. That was not a matter that was raised in the case until the very end of Mr Myers’ submissions and he was the last to address and then he referred simply to the 22 January minutes. Upon that basis the judge has built his conclusions that the main ground, or the first ground, for a finding of reasonable belief is an inference of legal oversight founded upon the minutes of 22 January.
The 30 March email is even more removed from the relevant issues. That is also in volume 6 at page 2423. This is remote from the announcements. It is 30 March it is after the Australian Financial Review has published articles about the true nature of the agreements and it is after, in fact, the agreements themselves have been released. It is an email from Mr Huston. What is relied upon by our learned friends is the last sentence. That is not addressing the nature of the undertakings in the agreement and there is no suggestion that that is a matter relied upon, in any way in relation to the announcements that were made.
The next point I want to refer to is the Anaconda Case (2000) 22 WAR 101. I am not going to go to it, but in addition to the fact, as the Chief Justice of the Federal Court said, that there was no evidence that Mr Forrest ever had that decision in mind when he made the relevant announcements, when you go to the case it provides no reasonable foundation for the assertions and the announcements. It is a case in which all of the essential terms were agreed and fixed. We would refer the Court to paragraphs 6 and 93 to 94.
When one examines more closely what, in fact, it was that the trial judge was saying about legal advice it becomes very plain that what he was saying was that Fortescue was entitled to rely on an absence of legal advice.
Can I refer the Court to some passages in the trial judge’s judgment? First, this is volume 8, paragraph 46 at page 3044. It is at the foot of the page, last four lines, Mr Huston:
did not advise –
then the last sentence commencing at that page ‑
That he did not, entitled the board and Forrest to continue to regard the disclosures . . . as correct –
Again there is the embedded assumption that they had some underlying belief, a conclusion arrived at without evidence. Then his Honour says that conclusion about the absence of advice is fortified by the two documents I have just been to.
FRENCH CJ: That was based on his involvement in the preparation of the letter of 8 November, was it not?
MR YOUNG: That he did not advise, your Honour?
FRENCH CJ: That he was involved in the preparation of a draft?
MR YOUNG: That was one aspect of Mr Huston’s involvement.
FRENCH CJ: The two things go together, do they not?
MR YOUNG: That was an occasion on which he might have but did not advise, but it is the absence of advice his Honour relies upon.
FRENCH CJ: The absence of his advice having been involved in the preparation – the absence of advice that the agreement was legally binding but seen in the context of his preparation or involvement in the preparation of the draft of the letter of 8 November. In other words, he has ‑ ‑ ‑
MR YOUNG: Yes, I accept that, your Honour, but ‑ ‑ ‑
FRENCH CJ: It is not just a simple matter of saying he did not advise and that his Honour relied upon an absence of advice in some paradoxical way.
GUMMOW J: Not just the last four lines in that paragraph, you have got to read the lot.
MR YOUNG: Yes, I did refer to them, your Honour. We accept that there was that occasion ‑ ‑ ‑
FRENCH CJ: It is just a forensic flourish to say that his Honour relied upon an absence of advice. It makes it sound like a species of rather paradoxical reasoning.
MR YOUNG: Yes. I will ‑ ‑ ‑
HAYNE J: Stop digging.
FRENCH CJ: Move on.
MR YOUNG: No, no. I do want to refer to a case about it and I was thinking of the reference. I should add this, your Honour. The judge’s process of reasoning is to be understood in the context where Fortescue never at any point contended that it relied upon advice. There were, in fact, documents over which there was a claim of privilege that remained privilege during this period, and that privilege would have been waived. We do not know what consequence it would have had, but that would have been waived had Fortescue said it relied upon either advice or an absence of advice.
The relevant privilege documents are listed in the Eaton affidavit, I will not go through it, commencing at page 3414 at volume 8. As to the absence of advice, I was pausing because I was trying to recollect the reference to the case. The case that dealt with an asserted reliance on absence of advice from solicitors involved in the transaction in question is Morley v ASIC 274 ALR 205.
HAYNE J: Where we are presently reserved on appeal.
MR YOUNG: It is, your Honour, yes. I can only work with the published judgment, your Honour. The passages are at paragraph [948]. Probably the context needs to be picked up from [947] and then [948]. The contention was that Mr Shafron was entitled to rely upon an absence of advice from Allens who had been involved in the very transaction. The Court of Appeal’s view appears opposite line 15:
there is no basis on which we can properly infer that he relied on the silence of Allens, and the same goes for the silence of –
the merchant bank. There was no evidence that Mr Forrest or any decision‑maker at Fortescue relied upon an absence of advice, even in the context of knowing that Mr Huston was involved in drafting the letter of 8 November.
In any event, in our submission, it is pure conjecture as to what Mr Huston would have advised. I have dealt with two of the three planks that the trial judge relied upon. The other one was CREC’s apparent approval. There was no explicit approval. Our submissions at paragraph 15 give the relevant references. The trial judge inferred approval. We do not dispute that that was open to him; that is paragraph 400. The same situation does not really apply to CHEC and CMCC because the only evidence was that the published press release was left on chairs at the signing ceremony. That is the trial judge at paragraph 51.
Now, in our submission, for the reasons by the Full Court, and in particular the Chief Justice at paragraph 134, an absence of response from the Chinese counterparties is not a foundation for a reasonable belief in the context of the statutory provisions we are concerned with. One of the other matters in the trial judge’s list of factors he referred to as supporting a reasonable belief comprised the advance framework agreements. The trial judge referred only to one aspect which was a minor change to the recitals. The Full Court’s analysis of the significance of the framework agreements for reasonable belief commences at paragraph 136. I need to go to that, if the Court pleases. The Full Court commences the discussion by pointing out that the matters that it is about to go to are relevant to two issues.
The first is the existence of any agreement. The second is the subjective beliefs of Fortescue and Forrest. The genesis of the advanced framework agreement resides in the email of 27 October, which the Court has been taken to. The Full Court sets out the relevant passages. Can I notice these features at page 3577 at about point 2 on the page, line 15.
FRENCH CJ: Paragraph?
MR YOUNG: I am sorry, your Honour. It is within paragraph 136, but it is over the page in what I have. The search is for a:
contract, as detailed enough to be binding on the total delivery of the project.
Mr Forrest is pushing CREC for – and then there is a series of items:
full responsibility for the commissioning and ramp up, a ceiling price of A$600m with incentives, [guaranteed] schedule . . .
and these are all hard asks –
We ask the Court to note that the matters that are being pushed for are matters that Fortescue now argues were the subject already of agreement by the parties. There was a price, subject to a third party determination provision and what was represented by the 23 August release was that there was a fixed price under the terms of the contract.
“Full responsibility for commissioning and ramp up” is the opposite of the representations about full risk lying with the Chinese. A “guaranteed schedule” is referred to for the first time, but the absence of any time for performance is not referred to in the announcements. The concept of being “detailed enough to be binding on the total delivery of the project” and in the last paragraph “really deliver the schedule”, sits inconsistently with the agreements claimed in the announcements. All of these matters bear upon Mr Forrest’s beliefs, as the author of the 27 October email.
Then turning to the advanced framework agreements for the moment I will work off the Full Court’s extracts, but I will need to go to them for one purpose. The first thing to note is that in paragraph 138 Fortescue put forward a recital that again sits in some tension with the way in which the agreement is now portrayed. It is recital 2. The framework agreement is not described in the way in which it was described to investors by the announcements. It is described as effectively a step in negotiations. The Chinese amended that to refer to the framework agreement. Now, that point does not provide, contrary to what the trial judge said, any foundation for a reasonable belief.
FRENCH CJ: What was the source of this draft advanced framework agreement? It came out of FMG but ‑ ‑ ‑
MR YOUNG: FMG sent it to Chinese.
FRENCH CJ: But who within FMG had the carriage of it?
MR YOUNG: There is one email that sheds a little light on it. It seems Mr Forrest had the carriage but in terms of who was drafting it ‑ ‑ ‑
FRENCH CJ: You can come back to that later if you wish.
MR YOUNG: It is in volume 5 of the appeal book, page 1718. It might be inferred that Mr Watling had some of the carriage because the Chinese portions are provided to him. Does the Court see the email at 1718? So Mr Watling gets FMG’s draft which has Chinese translations clause by clause.
FRENCH CJ: Mr Kirchlechner.
MR YOUNG: Well, Mr Kirchlechner was a Chinese speaker, so presumably he provided the translation, but he was not in a senior position such as Mr Watling.
GUMMOW J: Just looking at this document which we see is in two languages, what is your response to what Justice Hayne was asking at line 655 on the first day of this odyssey as to this word “binding”? You want to say “binding’ has all the subtleties involved in the case law under Australian common law. You are really talking about binding on a foreign state‑owned corporation, are you not?
MR YOUNG: No. Our answer is that ‑ ‑ ‑
GUMMOW J: To put it more precisely, would not an addressee of the press release have some at least rudimentary appreciation of that circumstance?
MR YOUNG: No, we doubt that, your Honour. The ordinary investor would read the announcement as conveying that this was a complete agreement and that what was being described were the elements of an agreement that had been arrived at in an Australian context.
FRENCH CJ: That goes to the content of the agreement rather than its binding or non‑binding character.
MR YOUNG: Yes, but binding would be understood as simply meaning a complete agreement. It would not necessarily be understood as having the sophisticated elements to which Justice Hayne referred to.
GUMMOW J: I do not think they are very sophisticated at all.
HAYNE J: I am flattered, but leave aside the flattery, all of the press releases, and I think some of the letters, referred to the fact that the counterparties were state‑owned corporations, did they not?
MR YOUNG: Yes, your Honour.
HAYNE J: So that the addressee knew that whatever this was, it was being done with a state‑owned corporation of the People’s Republic of China.
MR YOUNG: Yes, your Honour, and that was referred to as underscoring the commercial significance of the agreements. That was the context in which those references appear. But as for the references to a binding agreement to build and finance, in our submission, the same message would have been conveyed simply by saying “an agreement to build and finance”, that is, investors would have understood that the parties had entered into a complete agreement, one that would be recognised in Australian law as a complete agreement. There was no reference in the announcements to the effect that this agreement was not to be regarded as one that was enforceable under Australian law.
GUMMOW J: What do you mean enforceable under Australian law ‑ ‑ ‑
MR YOUNG: I mean an agreement ‑ ‑ ‑
GUMMOW J: In what tribunal?
MR YOUNG: Sorry, your Honour. I apologise.
GUMMOW J: In what tribunal before which the defendant can be brought against the defendant ‑ ‑ ‑
MR YOUNG: In our submission, investors would not have looked ahead to inquire in terms of what tribunal, but if, and to the extent to which they did ‑ ‑ ‑
HAYNE J: But that is the point, Mr Young. If investors would not look ahead to binding, what it is that you say is being conveyed? You want to have the proposition – it is binding because it can, in the future, be enforced and yet you say no, the investor is not looking forward to enforcement.
MR YOUNG: No, your Honour. We say that the words “agreement” or “binding agreement” convey that it is an agreement containing all of the essential elements that would constitute a contract under Australian law. That does not look ahead. As I answered Justice Gummow the other day, the agreement has equality now. Any agreement has equality when it is made. It is either a complete agreement or it is not a complete agreement in the eyes of the law. To say that is not to look ahead and to forecast the result of the case and in terms of it being state‑owned parties, in our submission, investors would not have qualified their understanding of what was conveyed in terms of it being an agreement to build and finance, because they thought an agreement with a state‑owned party was in some way less of an agreement or lacked some quality ‑ ‑ ‑
GUMMOW J: They are supposed to know about Hall v Busst and so on, but there are not supposed to know about the Foreign States ImmunitiesAct.
MR YOUNG: No. It is not a question of knowing the precise legal questions, your Honour. Those cases arise because if what is conveyed is the existence of an agreement – a complete agreement containing the essential elements of an agreement – where important matters are not left for further agreement that is all that investors would understand from this.
FRENCH CJ: So is it right to say then that your case goes to an asserted failure to disclose or a misrepresentation relevant to the fact that the agreement was not complete in the sense of not requiring further negotiation – putting to one side questions of legal enforceability.
MR YOUNG: The way we would put it, your Honour, is that the representation that it was an agreement containing binding obligations to build and finance in a form common in the international construction industry containing a fixed price under the terms of the contract and a full allocation of risk conveys that it is an agreement containing all of the terms that would be necessary to have a final and complete agreement in the Australian context.
FRENCH CJ: But you are stepping around the question whether – in other words, you are saying, are you, that it is not necessary to consider whether - for your case, whether the agreement was legally binding or not, in any relevant sense, either under Australian law or Chinese law or ‑ ‑ ‑
MR YOUNG: No, no, I am not trying to step around that. I have said a number of times that an investor would understand it as an agreement which was binding as a matter of Australian law. That is the way Mr Jackson put it. But that is not all an investor would understand. An investor would understand from the full context of the statements and the other references that the agreement contained the essential elements of commitments to build and finance, price and a complete risk allocation. Those positive representations convey that it is not an agreement by which the parties by way of framework have merely agreed to jointly develop and agree matters going to price, identification of works and other matters bearing on risk allocation.
HAYNE J: Why should I not understand that as a further and different formulation of the case that is pleaded, for example, in paragraph 28?
MR YOUNG: In our submission, it is not, your Honour. What I have referred to in answering the Chief Justice are the elements of the agreement that have been pleaded and what I was contrasting was what was represented as the contents of the agreement. So, when it is alleged in paragraph 28(a) that the CREC agreement did not state that CREC would “build and finance” and later on that it did not state that CREC would complete any works, that is a positive representation that the agreement had all of the necessary elements to make it binding. They were contained in its provisions.
That is falsified when one goes to the provisions and finds that it does not contain those elements. It is not a further permutation, your Honour. The positive – the allegations of positive misrepresentations cover the field that the true nature of the agreement is not being disclosed.
HAYNE J: Well, that is a very large proposition, Mr Young. A regulator that is seeking a penalty should identify its case with considerable precision. Do you accept that?
MR YOUNG: Yes, we accept that, your Honour, and that was the endeavour in this case. There was no difficulty when one also goes to the way in which the case was run. It was fully understood ‑ ‑ ‑
GUMMOW J: Well, it should be clear before the case starts to run, should it not?
MR YOUNG: Well, in our submission, it was clear, your Honour, and it was clear in running as well. There was no lack of understanding about the matter.
GUMMOW J: But there must be a view that this pleading could come under scrutiny as embarrassing, so it strikes me.
HAYNE J: Containing too many permutations at the least.
MR YOUNG: What we say, your Honour, is that those permutations were there because the agreement contained numerous – sorry, the announcements contained numerous statements about different aspects which were open to or may have been open to different characterisations.
FRENCH CJ: Can I ask this? Is the alleged represented legal effect of the agreements a critical element of your case?
MR YOUNG: No. It is an important element but our case would still be established if one goes to other representations within the announcements and finds that they were misleading.
FRENCH CJ: So if I look at 28(a) do I see two cases: one relating to what was actually set out in the framework agreement by way of contrast with what was said about it, and another about the legal effect of the framework agreement, as distinct from what was said about it?
MR YOUNG: Yes, your Honour. Your Honour was correct the other day when your Honour said we had a three‑pronged case.
FRENCH CJ: Yes.
MR YOUNG: The actual contents of the framework agreement were misrepresented by the announcements. The legal effect was misrepresented by the announcements and, insofar as statements were to be characterised as an opinion, there was no reasonable basis for it. Can I go back to the framework agreements, your Honours, and complete the submission? Can I ask the Court to have open again the Full Court’s discussion of the framework agreements?
Now, the point the Full Court made was that there were other compelling changes from the framework agreement revealed by the advanced framework agreement that told one a lot about the actual beliefs of Fortescue and its relevant decision‑makers, including Mr Forrest. The first was the definition of “Performance Date” in paragraph 140 at 3579. According to the argument now advanced, that matter was fully agreed already.
What is advanced is a performance specification for the first time, paragraph (d). So what is advanced is inconsistent with the framework agreement already determining this as an agreed core obligation. There is now a performance specification. Mr Forrest publicly announced a different performance specification in his Business Sunday interview of 90 per cent of design specifications. So investors were being misled as to what the performance specification was for completion.
They were not told anything about that in the ASX announcements, but it was covered by the assertion of full risk allocation. There cannot be a full risk allocation without agreement upon what constitutes completion, and there was no agreement about what constitutes completion. Mr Jackson submitted that there was an underlying agreement to adopt AS4300, which was “the Chinese response”, paragraph 141. That was advanced for the first time on the last occasion we were here. There is no evidence at all of a pre‑existing agreement to adopt AS4300. It may have been an available source for a definition, but there was no agreement upon it.
Then, most importantly, the value of the works, paragraph 143. Contrary to the contention that the value of the works was already agreed and subject of a binding third‑party determination provision, what is advanced here is a ceiling price of $600 million, and that is rejected by the Chinese in the passages referred to in paragraphs 145 and 146. So, in relation to the matters that the Chief Justice refers to, in our submission, he is right when in paragraph 150 he observes, for instance:
that price is left at large –
there was no agreement about price, contrary to the August representations. Most relevantly to the point I am now making:
there was no reasonable basis for the claim in the ASX letters and associated media releases that the initial framework agreements contained a “fixed price”.
Mr Forrest could not believe that, given this evidence.
HAYNE J: Is the premise for what appears in paragraph 150 of the Full Court reasons that the framework agreements can be understood only as implementing the arrangement – to use a neutral term – that had earlier been reached and not to be understood as seeking to introduce new or different terms? It would not be unknown, would it, for two commercial parties to treat a binding agreement as a basis for further negotiation, and we have all encountered that, I think, have we not?
MR YOUNG: Yes, there are two issues here, which the Chief Justice identified at the outset. One, is there a contract at all, given this evidence of a lack of agreement upon essential matters? Put that to one side. There is a second issue about what the advanced framework agreement says about the state of Mr Forrest’s reasonable beliefs. The representation that under the terms of the contract there is a fixed price was referring to the provisions of the framework agreements, as claimed in the ASX announcement.
The proposition that these matters are now being advanced in this way is inconsistent with a proposition that there was a reasonable belief to support the claims in the 23 August release. Now, to answer your Honour’s point. I think your Honour’s point was going to the contract issue. It is not unheard of for parties to have a framework agreement and then to negotiate additional terms and conditions.
HAYNE J: It is not unknown for parties who have a complete, full, binding, absolute agreement, for at least one of those parties to say, yes, well, that is a good start, now can we have a real debate about further terms?
MR YOUNG: Your Honour, if we are talking about beliefs, we are comparing this evidence with what was publicly claimed. That is the contrast that is relevant in the context of beliefs. What was publicly claimed was that under the terms of the contract there was full risk allocation and fixed price. Those claims about a hundred per cent risk being assumed by the Chinese continued to be made after this. So, an open slather negotiation about price is inconsistent with telling the public the Chinese have agreed to accept a hundred per cent of the risk. You cannot have both.
Order 2.1(a), to take it by way of example, would be changed by deleting the words in brackets in the first and second lines of 2.1. Then at the bottom of that page the words “material terms and effect” would become “material terms or effect”. Now, the order in its existing form was made for the reasons given by the Full Court at page 3625, paragraph 6, and the observation there itself reflects paragraph 187 of the Full Court’s earlier reasons at page 3593. While your Honours are at page 3593 could I just interpolate something on a topic raised by your Honour Justice Heydon this morning?
Your Honours, if one goes to paragraph 181 you will see the first sentence in paragraph 181, which mirrors the first sentence in paragraph 189, and in our submission, underlies the reasoning of the Full Court, but coming back to the Full Court’s reasons at paragraph 187 on page 3593. Now, the differences between the orders made by the Full Court and those sought to be made by the special leave application are two. There remain three contraventions, but they commence at very slightly earlier times; that is the first thing. The second is that they differ also because the finding would be that knowledge of the terms or effect of the agreements –
although on the assumption they would not be legally binding – would have attracted the operation of section 674.
That is an issue, your Honours, on which the respondent failed at first instance, and we have given the references in paragraph 31 of our submissions in reply. Now, we would invite your Honours to look at that without taking your Honours to it now. The respondent did not persuade the Full Court on this question and it really had two attempts to do so. You will see at page 3620 that in paragraph 3 the respondent said:
greater specificity was required –
and wanted to have the order varied. Then it sought to have – and you see from paragraph 4 – orders made almost the same as those now contended for. So there were really two attempts by the respondent to do so in the principal hearing in the Full Court secondly, and the issues on the judgment here.
Now, that the issue would involve the Court in going to a factual question is really quite apparent from the respondent’s reply submissions on the notice of cross‑appeal, in particular, your Honours, paragraphs 9 and 10 of that document, and also, your Honours, the need to refer to the matters in the footnotes to paragraph 10. So, it is a factual issue into which the Court would need to go. Your Honours, we would say, to what ultimate end should the Court get into that issue? The question of contravention of section 674(2), in our submission, could only arise in the first place if the contracts were not binding contracts. A question would then arise on that assumption whether we believed on reasonable grounds that they were binding agreements, and if we did we could only contravene section 674(2) if we were aware in terms of listing rule 19.12 of material information.
Now, your Honours, I have dealt with our submissions on that, but assuming that we failed and it was held that we were aware of relevant information the result would simply be that the success of the cross‑appeal would give the three contraventions a slightly earlier, but different, starting point on the relevant day and, your Honours, that might be a question which would agitate those who write about the general area at great length and for many pages, but in our submission, it is not one which should trouble the Court. Your Honours, those are our submissions.
FRENCH CJ: Thank you, Mr Jackson. Yes, Mr Myers.
MR MYERS: Thank you, your Honours. We would opt the submissions in reply of Mr Jackson. There has been a good deal of debate about the meaning of the further amended amended statement of claim. The pivotal provision is paragraph 136 and it goes back to refer in relation to, say,
CREC, paragraphs 19 and 20, in relation to CHEC, paragraphs 59 and 61, and in relation to CMCC, paragraphs 63 and 65. Save for the fact that they are agreements with different parties, they are all in the same terms, and that is the case that was put and that is the case which Mr Forrest had to answer and none other.
If I could just once more invite your Honours to look at that statement of claim, look at paragraph 19 and paragraph 20 I just want to point out one thing?. Paragraph 19 sets out the terms of the agreement which should have been disclosed. It is a bizarre aspect of this case that if one looks at paragraph (e) one of the things that should have been disclosed and was certainly disclosed was that by clause 5 the correct framework agreement would become binding upon approval, et cetera, so one of the things that is complained about is that Mr Forrest disclosed the very things that they plead he should have disclosed.
The nub of the case is in paragraph 20. Whilst he signed an agreement, negotiated an agreement which both parties made binding, approved, which says it is binding, he should have held in his mind at the same time the curious notion that although it was binding it was not binding and that should have been also announced to the public as provided in paragraph 20. The same applies in relation to 59, 61, 63 and 65, which are in almost identical terms. There is only one other matter to which I want to refer. It may seem peripheral but it does have some significance. My learned friend today said, incorrectly, that in relation to the minutes of the board meeting at Bunker Bay of 22 January 2005, that we only waived privilege after he had completed his final address.
Now, that is quite wrong. The matter is dealt with in three affidavits, and I am just going to give your Honours the references to them in the court book. They are all in volume 8. The first is of Mark van Brakel, which is volume 8, page 3363 – I do not want your Honours to go to them now – an affidavit of Nick Cooper at page 3368, and an affidavit of Danielle Lise Eaton at page 3411.
What these affidavits show is this; that the minutes were tendered by ASIC in the unredacted form referring to the agreement, and we did not object to that. Then after they were tendered Ms Eaton said, “Do you not want to claim privilege on those?” or “Did you not claim privilege on those?” and we said, “No”. We said “no” on 2 May, and Mr Young commenced his address on 4 May. We say that our friend was in error. He made this statement to the court below, and it was apparently accepted by the court below, but in fact, it is wrong. If the Court pleases, they are our submissions in reply.
FRENCH CJ: Yes, thank you, Mr Myers. The Court will reserve its decision. The Court adjourns until 10.15 am on Tuesday, 17 April 2012.
AT 3.34 PM THE MATTER WAS ADJOURNED
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