Forrest v Australian Securities and Investments Commission & Anor; Fortescue Metals Group Ltd v Australian Securities and Investments Commission

The High Court of Australia considered appeals from decisions of the Full Federal Court concerning alleged contraventions of the *Corporations Act 2001* (Cth) by Andrew Forrest and Fortescue Metals Group Ltd (FMG). The Australian Securities and Investments Commission (ASIC) alleged that Mr Forrest, as a director of FMG, had contravened s 180(1) of the *Corporations Act* by failing to exercise his powers and discharge his duties with the degree of care and diligence required. ASIC also alleged that FMG had contravened s 1041H of the *Corporations Act* by engaging in conduct that was misleading or deceptive or likely to mislead or deceive in relation to financial products. The core of the dispute related to Mr Forrest's disclosure of information to the FMG board regarding potential contracts for the supply of iron ore to Chinese steel mills.

The central legal issues before the High Court were whether Mr Forrest had contravened s 180(1) of the *Corporations Act* by failing to disclose certain information to the FMG board, and whether FMG had contravened s 1041H of the *Corporations Act* through its public statements. Specifically, the court had to determine the nature and extent of Mr Forrest's duties of care and diligence as a director, and whether his conduct in relation to the disclosure of information about potential contracts met the required standard. Furthermore, the court was required to assess whether FMG's public announcements regarding these contracts were misleading or deceptive, or likely to mislead or deceive, in light of the information available to Mr Forrest and the board.

The High Court allowed the appeals, finding that ASIC had failed to establish the contraventions alleged. The court held that the evidence did not support a finding that Mr Forrest had failed to exercise reasonable care and diligence. It was reasoned that the information available to Mr Forrest at the relevant times did not necessitate disclosure to the board in the manner alleged by ASIC. Regarding the s 1041H contravention, the court found that FMG's public statements were not misleading or deceptive, as they reflected the information and understandings that were reasonably held by the company at the time. The court emphasised that the standard for directors' duties and for misleading conduct requires a careful assessment of the specific facts and circumstances, and that mere speculation or the absence of perfect foresight does not equate to a contravention.

The High Court ordered that the appeals be allowed, and the judgment of the Full Federal Court be set aside. The proceedings in the Federal Court were dismissed.