AISCOf Fortescue Metals Group Ltd Samples †MyAssignmenthelp.com

Question: Discuss about the AISCOf Fortescue Metals Group Ltd. Answer: Facts of the case The Australian Securities and Investment commission initiated proceedings against Fortescue Metals Group Ltd (Fortescue) along with Andrew Forrest (chairman, CEO and substantial shareholder of Fortescue:Forrest) in the Federal Court of Australia. The case was in relation to the announcement made by the company to the broad market and the media in relation to a number of Framework Agreements between three states owned Chinese corporations and Fortescue[1]. The framework was related to financing and building services which were to be given in relation to Pilbara Iron Ore and Infrastructure Project of Fortescue. There was an allegation by the Australian Securities and Investment commission that Fortecue and Forrest have violated the provisions of the CA in the year 2004 and 2005 by giving information to the ASX in relation to a future mining project in west Australia known as the PIOIP. The project consisted of the development of a mine in the region of Pilbara located in Western Australia. Letter were sent by the defendant during August and November 2004 to the ASX along with media release in relation to such agreements which stated that the defendant had got into a binding contract with China Harbour Engineering Company CHEC, China Metallurgical Construction (Group) Corporation CMCC and China Railway Engineering Corporation CREC to finance transfer and build railway, mine and port in relation to the project. Various other communication s had been made by the defendant which were in relation to the agreements the defendants had with the three companies. According to the announcement each of the framework was treated as a binding agreement between the parties. However upon analysis it was found that the terms contained in the contract were ambiguous and unclear to be made legally binding and be enforced law. The claim made by the Australian corporate regulator AISC was rejected by the trail court as Justice Gilmour allowed an appeal of the decision with respect to the full court of the federal court. The AISC had thus appealed to the full court against the decision of the trial court. After AISC got the desired results from the full court an appeal against the order was made by the defendant to the High court. The AISC had alleged that the company had engaged in an act which accounts to the breach of section 1041H of the Corporation Act 2001 (Cth). The AISC also alleged that the defendant had violated section 674 of the CA in relation to disclosure requirements[2]. In addition it was provided by the AISC that the defendant director did not comply with section 180(1) of the CA as he did not discharge his duties and powers with the proper implementation of skill and diligence. Issue In this case the issue before the court was to determine whether the announcement made by the defendant company to the target audience who were mainly investors accounted to the violation of section 1041H of the CA and accordingly the breach of directors duties under section 180(1) of the CA and section 674 in relation to continuous disclosure obligation of a listed company. The relevant law According to Section 1041H of the CA states that a person is not allowed to indulge in an act which is deceptive or misleading or is likely to mislead or deceive in relation to a financial service or a financial product. The provisions of the section include any act in relation to financial services and products such as providing a financial product which in return provides a security[3]. According to section 674 of the CA the listed entities with the Australian Securities Exchange have an obligation to make disclosure in compliance with the rules provided by the listing and also the entities are obligated through the section to give information to the market operator[4]. In addition it was provided by the AISC that the defendant director did not comply with section 180(1) of the CA as he did not discharge his duties and powers with the proper implementation of skill and diligence. Section 180(1) of the CA provides that a person is obligated to carry on his responsibility towards the company with proper skill and diligence which would have been done by a reasonable director in similar conditions[5]. At commonlaw the first idea is expressed in the tort of deceit and the second in liability for negligent misrepresentation[6] In the case of Krakowski v Eurolynx Properties Ltd it had been ruled by the court that in order to establish a claim for fraud it has to be provided that there was no honest belief in relation to the accuracy of the statement in the same sense through which the representor wanted it to be understood[7]. In the case of Wallingford v Mutual Society[8] it had been provided by the court that in order to mount a case of fraud specific pleading is required along with the element of particularity. In the case of Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (in Liquidation)[9] it had been ruled by the court that no person must be subjected to a detriment without giving him appropriate opportunity with respect to addressing the allegation which have been made against him. In had been provided by the court that even if various number of alternative submissions and arguments are made they are not adequate to aid coherence and comprehension in relation to exposition and analysis. In addition the emphasis on the central issue may be distracted through the use of this approach[10]. Section 180(1) is said to be violated only when an action was against thelaw which a reasonable person would not have done. Bibliography ASIC v Forrest and Fortescue [2012] HCA 39 Corporation Act 2001 (Cth) Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 578 Derry v Peek (1889) 14 App Cas 337 (https://www5.austlii.edu.au/au/journals/UNDAULawRw/2011/8.pdf)