PART A

INTRODUCTION

The case discussed in this assignment is Forrest v Australian Securities and Investments Commission [2012] HCA 39. As a controversial case, in initial the judgment was made for ASIC. And then, the judge had given the verdict in favor of Forrest and Fortescue Metal Group in the Federal Court. But finally, in the High Court of Australia, the verdict found that both Forest was not guilty and the Company did not breach any sections of the Corporate Act in 2001.

BACKGROUND

Fortescue Metal Group Ltd (Fortescue), located in Western Australia, was a mining company (Fortescue Metal Group Ltd 2014). Mr Andrew Forest was chairman, chief executive and substantial shareholder in Fortescue (Fortescue Metal Group Ltd 2014). The Australian Securities and Investments Commission (ASIC) sued Fortescue and Forrest about a contract regarding the Port Hedland and a railway was to be built to connect the mine and the port.

Fortescue signed a contract with three Chinese corporations, included China Railway Engineering Corporation (CREC), China Harbour Engineering Company (CHEC) and China Metallurgical Construction Corporation (CMCC) during August and November 2004. The three contracts were signed separately and being combined to be known as “Framework Agreement”.

During August and November 2004, Forrest released a press that Fortescue had entered into a binding contract with CREC to build and finance a project which included construction of the railway.

In March 2005, Australian Financial Review published an article stated that framework agreements were not legally binding. One year later, ASIC began proceedings to Mr Forrest and Fortescue in the Federal Court of Australia. Finally, ASIC was successfully in obtaining orders that Fortescue breached misleading or deceptive conduct in section 1041 H of the Corporations Act 2001, Fortescue breached