Fortescue Metals Group Ltd v Australian Securities & Investments Commission & Anor; Forrest v Australian Securities & Investments Commission & Anor [2011] HCATrans 271 (29 September 2011)

Last Updated: 30 September 2011

[2011] HCATrans 271

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Perth No P6 of 2011

B e t w e e n -

FORTESCUE METALS GROUP LTD (ACN 002 594 872)

Applicant

and

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

First Respondent

JOHN ANDREW HENRY FORREST

Second Respondent

Office of the Registry
Perth No P7 of 2011

B e t w e e n -

JOHN ANDREW HENRY FORREST

Applicant

and

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

First Respondent

FORTESCUE METALS GROUP LTD (ACN 002 594 872)

Second Respondent

FRENCH CJ
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON THURSDAY, 29 SEPTEMBER 2011, AT 9.31 AM

Copyright in the High Court of Australia

__________________

MR D.F. JACKSON, QC: May it please the Court, I appear with my learned friend, MR B. DHARMANANDA, for the applicant in the first matter, P6, and the second respondent in P7. (instructed by Corrs Chambers Westgarth)

MR A.J. MYERS, QC: May it please the Court, I appear with MR M. THANGARAJ, SC, for Mr Forrest in each of those matters. (instructed by Gardens Lawyers)

MR N.J. YOUNG, QC: If the Court pleases, I appear with MR J.A. THOMSON for the first respondent in each matter. (instructed by Mallesons Stephen Jaques)

FRENCH CJ: Yes, Mr Jackson.

MR JACKSON: Thank you, your Honours. May I go first to the orders made by the Full Court? Your Honours will see those in volume 2 at page 461, and your Honours, as is apparent from them the applicant was found to have contravened two provisions in the Corporations Act, namely section 674(2). The orders are referred to in order 2.1 at the second half of page 461 - and the second provision was section 1041H and that is order 2.2. I might mention, your Honours, this was a variation of an earlier order made by the Full Court. Your Honours, there is a difference in the effect of those orders because, while contravention of either provision will, or may, result in the making of a declaration of contravention, it is only a contravention of section 674(2) which may result in pecuniary penalties.

Your Honours, the contravention of section 1041H was held to have occurred because we had made announcements that we had entered into binding agreements with three Chinese companies to build and transfer, or build, finance and transfer the three elements of our Pilbara iron infrastructure projects but, your Honours, although we had entered into contracts which were stated to be binding and which it was found by the primary judge were reasonably believed to be binding, the announcements were held to be misleading or deceptive in terms of section 1041H because the agreements were insufficiently detailed as to the obligations of the party to amount to agreements enforceable, or to put it another way, they were agreements to negotiate and the contravention of section 674(2) was held to have occurred because, having contravened section 1041H, we were obliged to correct those statements.

The two passages that say that, your Honours, can be see in volume 2 at page 435, the last sentence of paragraph 181 and also paragraph 189 on page 438. Your Honours will see that, again in the first sentence of that paragraph. Your Honours, may I deal first with section 1041H then go to the question of the finding as to belief and then go to section 674(2)?

FRENCH CJ: The debate about the binding character of the agreements proceeded on the premise that it was the common law of Australia that applied.

MR JACKSON: Yes, your Honour.

FRENCH CJ: Because I noticed that there were provisions in each of the agreements that they complied with both Australian and Chinese law.

MR JACKSON: Yes. But it is a question of Australian law, yes. Your Honours, in dealing with section 1041H, the statements we made were that we had entered into a binding contract to, for example, build and finance the relevant part of the infrastructure. You can see the statements in volume 3 by way of example, at page 509. That is really the first two paragraphs of that document. That is the statement to the exchange and then the media release of the same date which expresses it more fully in page 511.

Now, your Honours, the contract to which reference was made can be seen in volume 3 at page 497. We have made some detailed submissions about that in our summary of argument, and may I just direct attention to a number of matters? It is clear, we would submit with respect, it was purported to be precisely what it had been described as in those announcements. If you look at page 497, recitals A and B, the Chinese company: -

represented that it has the necessary skills, personnel and equipment to successfully carry out and complete the Build and Transfer of the railway (the “Works”) –

Your Honours will see the remainder of that recital, and then paragraph B in the recitals, that the parties wished to evidence their agreement in that regard. You will see on page 499 in clause 5 that the agreement was to:

become binding upon the approval of both the Board of Directors of -

both bodies, which occurred. You will see clause 7 on page 499, which said that:

This document represents an agreement in itself and it is recognised a fuller and more detailed agreement not different in intent from this agreement will be developed later.

There was a target date for the works, clause 4. There was provision for payment in clause 3.1 and the way in which it was to be financed. Much of the scope of the works was provided for by clause 2, which your Honours will see on page 498, and the fuller agreement contemplated by clause 7 was elaborated upon by clause 1.1. No part of the agreement is expressly subject to clause 1.1 and, your Honours, provision for determination of the schedule and value of the works in the event of disagreement was made by clause 1.2. Your Honours will see that it refers to, amongst other things, that there be:

Independent review of the schedule and value of the Works.

Your Honours, if those provisions did not extend far enough then, in our submission, the case was one where it would be determined on the basis of reasonableness and appropriateness to the subject matter of contract.

FRENCH CJ: Was there evidence that the announcement in relation to this agreement was shown to the Chinese party before it was made?

MR JACKSON: Yes, there was, your Honour. I am about to take your Honour to that passage, if I may, in just one moment. Before doing so, your Honours, could I say this, that it was not as if the parties, in making the agreement, did not know what they were talking about. Could I refer to the events that are summarised in our written submissions with the relevant references in volume 3 at page 486, and in particular, your Honours, paragraphs 7 through to 12 which set out the events in relation to the agreement with the railway company and then 1, the other two grounds.

Your Honour the Chief Justice asked me about the approval by the other contracting party. You will see that referred to in the reasons for judgment of the primary judge in volume 1, page 49, in paragraphs 151 through to 155. Your Honours, I will not read it out, but your Honours will see that when one comes to paragraph 155, in the second sentence he inferred that the Chinese company “approved the material wording” and so on, and your Honours will see the remainder of that paragraph. But one really does need to look at 151 to 155.

Your Honours, could I just pause to say that this discussion by the primary judge clearly supports the view that he arrived at that that we honestly and reasonably believed that those contracts were of the relevant kind. This does not appear to be discussed by the Full Court at all. Your Honours, could I say that the statements, in our submission, in the documents of 23 August 2004 conveyed a belief, we would submit, that there was a binding contract with the Chinese railway company for it to build, and to provide the finance for the building, the railway component of the project. We would submit that the primary judge was perfectly correct, if I can go to page 201 in volume 1, in saying in paragraph 684 in the fifth line of that paragraph:

As an objective matter, an assertion as to the meaning and legal effect of an agreement is necessarily the product of an opinion formulated to that effect.

That was followed, your Honours, at paragraph 685 on the same page, by his conclusion that:

A reasonable reader of the [statements] would have expected [the applicant] to have a genuine and reasonable basis for making those statements –

Your Honours, if I could just pause there for a moment. You will see that he made a reference in the list of cases to which he referred to Global Sportsman v Mirror Newspapers. I mention it, your Honours, because it appears again in the Full Court’s reasons. Your Honours, if one goes back to what he said in the first sentence in paragraph 685, in our submission, why would anyone assume more than that? In particular, why would one assume that it was being asserted that if the issue arose in a court, presumably as between the parties to that agreement, the court would, or the court finally determining the question because there may be appeals, would necessarily find that there was a binding agreement to build, to transfer, et cetera.

FRENCH CJ: Well, the question will be what representations were being conveyed by the statement.

MR JACKSON: Yes, your Honour, and, in our submission, it conveys the belief that there was an agreement that was a binding agreement, and it being a statement made publicly by a company that it has a reasonable basis for that belief.

FRENCH CJ: How do you deal with the proposition that this is really just a debate about characterisation of the statement embedded in a particularly fact-dense matrix?

MR JACKSON: Well, your Honour, of course it arises in a particular factual context, but it arises – if I could just say this, it arises not just in relation to one statement, but a number of statements, first of all. The second thing about it is that it has of course quite serious consequences when one goes to section 674(2), and the third thing about it is, your Honour, and I am going to come to this in just a moment, but if one looks at the way in which the Full Court dealt with it, the way in which the Full Court dealt with it was one that was itself unsatisfactory for a couple of reasons to which I am going to come. Your Honours, because the Full Court has taken that view, it is a view that is very likely to be followed in courts below and is of some importance in relation to both those provisions, 1041H and 674(2).

Your Honours, could I just say this, that if one goes to what the Full Court said, and that is in volume 2, page 409, in particular, paragraphs 107 and 108, you will see that in paragraph 107 at the bottom of the page 409 perhaps I should have said, that the court there emphasised the words from Global Sportsman, “expression of opinion which is identifiable as such” and then proceeded, your Honours, at paragraph 108, to say in the second sentence, having emphasised the word “identifiable” earlier:

In my respectful opinion, the trial judge erred in approaching this issue on the basis that ordinary and reasonable readers of FMG’s public announcements would have regarded them as conveying no more than a statement of FMG’s opinion on issues of law “identifiable as such”.

That approach, in our submission, involves two elements which are erroneous. The first is that it diminishes what the statements did convey, namely that we believed that we had entered into binding contracts for performance of the works as stated in them. We were not putting forward, your Honours, as statements as to issues of law and the issue is rather skewed, in our submission, by the description of it in the last part of paragraph 108, namely:

conveying no more than a statement of FMG’s opinion on issues of law “identifiable as such”.

The second aspect, your Honours, is this, that the way in which the Full Court deals with the matter rather treats the words “identifiable as such” from Global Sportsman as if they are not capable of being satisfied if they describe a correct test, not capable of being satisfied by the nature of the statement itself. Your Honours, if one sees that one has entered into a binding contract with someone under which that person is to do certain things, that is inevitably a statement of a belief.

FRENCH CJ: But on the other hand, in the context in which it is made, in the discharge of a duty to keep the market properly informed, it conveys more than that this is just a statement of the representor’s untutored opinion. I mean, this is obviously a seriously considered matter, is it not?

MR JACKSON: Your Honour, that is so. We are saying we believe, and we have reasonable grounds for doing so, that we have entered into a contract which has..... What we are not saying, in our submission, is that - - -

FRENCH CJ: I am sorry. All I am dealing with there is the proposition that it is no more than a statement of opinion. It is a serious statement of opinion in a serious context, is it not?

MR JACKSON: Yes, your Honour. I am not sure that 1041H gives rise to a duty as distinct from 674(2) as such.

FRENCH CJ: But is the context in which it is made and the legal context in which it is made which may inform its characterisation, surely.

MR JACKSON: Your Honour, I would accept that one has to look at the context in which it is made and I would not dispute what your Honour has put to me for immediate purposes, but having said that, one then has to look at what is said, and what is said is a statement that we have entered into a binding contract with someone to do something. Your Honours, that is a statement, in our submission, as to belief, and it would seem slightly odd, with respect, if the situation that emerged was, for example, that the contract, if there were proceedings between the parties too, was one that was held to binding at first instance, then held not to be binding on appeal, then held to be binding by this Court on a further appeal.

It is in circumstances of that type that one does have to bear in mind that a statement that they have entered into a binding agreement is something which conveys a statement of belief as to what it is and quite properly – and this answers, in a sense, what your Honour is putting to me – that is made on grounds that are reasonable.

Your Honours, could I just say this also, that the examples given by the Full Court at paragraph 109, in our submission, illustrate the error in approach about the car. In our submission, a statement that one has sold a car for $1,000 is a statement of belief, we would submit, that the car has been sold rather than prediction of the course of decision..... We would submit the approach taken by the Full Court on this issue is too narrow and the issue should be considered further by this Court.

Your Honours, may I say something about the existence of belief? The Full Court in volume 2 at page 440 in paragraph 194 when dealing with the case against Mr Forrest personally, relied on a document showing:

that he knew that further steps were necessary to reach agreement on the scope, financing, subject matter and price of the Project.

The document is one which is referred to at page 420 in volume 2 in paragraph 136. May I just say this about it, your Honours. It is in the document in the context of negotiations about the fuller agreement contemplated by clause 7 of the framework agreements, as were the negotiations that are referred to in paragraphs 137 to 150. In our submission, the Full Court has not given any weight to this clause 7 of the agreements, and could I refer your Honours to our written submissions in the summary of argument in volume 3 at page 490, paragraph 39, and in particular the whole of paragraph 49, and also paragraphs 55 and 56 on page 492. Your Honours, we rely also on the submissions that have been made on behalf of Mr Forrest personally in that regard.

Could I turn to section 674(2), your Honours. The Full Court’s approach – and I took your Honours to paragraphs 181 and 189 of its reasons for judgments – was that once it had appeared that the framework agreements were not enforceable agreements to construct the infrastructure, section 674(2) was contravened. The reasoning underlying that conclusion – your Honours, I see that the time has expired, may I have five minutes to - - -

FRENCH CJ: Yes, you can.

MR JACKSON: Your Honour, the reasoning underlying that conclusion is at page 436, paragraph 183 in the last sentence on that page. Your Honours, the nature of the contravention is also set out more precisely at page 437, paragraph 187, and it is the last three lines on page 437 going over to the top of the next page.

What one does not see is a reference in the discussion to the actual application of section 674(2) to the terms of the provision. The terms of section 674(2) can be seen in our materials in page 1 of the applicant’s book of authorities and materials. Speaking generally, section 674 of the Corporations Act imposes an obligation on a listed disclosing entity in compliance with the continuous disclosure obligations contained in the relevant listing rules.

In particular, section 674(2)(b) imposed the obligation to notify us, notify the ASX if we had information that those provisions, that is the ASX listing rules, required us to notify the stock exchange. Listing rule of 3.1 is at page 15 of that volume. It provides, and your Honours, the print is rather small, but three-quarters of the way down the page you will see the heading “Immediate notice of material information”. Rule 3.1 says:

Once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities, the entity must immediately tell ASX that information.

Then the term “aware” by is defined by clause 19.12 on page 17 at the bottom of the page and it provides that:

an entity becomes aware of information if a director or executive officer . . . has, or ought reasonably to have, come into possession of the information –

et cetera. Your Honours, the material – the price sensitive information that it was claimed we had to disclose was that the three agreements were not enforceable to oblige each of the Chinese companies to build, finance and transfer the infrastructure. The trial judge found as a fact.....that the directors, officers, et cetera, were aware of those matters. You will see that referred to at page 141, paragraphs 465 to 467 in volume 1.

Your Honours, putting it very briefly, to arrive at the conclusion the judge considered the evidence as a whole and in considerable detail. He found that our internal records reflected a belief in the enforceability of the agreements. He found that officers behaved as if the three agreements were enforceable. He found that they reflected a progression towards a fuller agreement rather than negation of the three agreements. He found that when we wanted to make a non-binding agreement we did so, and the contrast suggested that the three framework agreements were intended to be binding. Your Honours, the Full Court did not conduct any close analysis - - -

FRENCH CJ: The Full Court at 189 – is it oversimplifying the position to say that the Full Court treated the obligation under 674(2), as it were, the obverse, or a corollary if you like, of the misleading or deceptive conduct finding?

MR JACKSON: That is exactly what it did, your Honour, and that is the words they used. They said because – and I think I have taken your Honours to paragraphs 181 and 189 and a couple in between, but that is exactly what they said; one follows from the other. But the reality, with respect, your Honours, that under section 674(2) there is an extra element and that is that the applicant had, or ought to, through its officers - either had to possess, or reasonably should have possessed, information that the agreements were not enforceable and the Full Court did not, with respect, address this issue where the trial judge had made fair findings that we were not relevantly aware. Your Honours, could we just say this, that - I am almost - - -

FRENCH CJ: I presume Mr Myers is not going to repeat the common material.

MR JACKSON: Your Honour, I cannot speak for Mr Myers, with respect.

FRENCH CJ: We will anticipate.

MR JACKSON: Your Honours, could I just say this, that in our submission, a person who has information about the contents of a legal document, but with, for example, an incorrect but yet reasonable belief about its legal effect, cannot, in our submission.....possession of information about the true status of the contents of the document, and when we reasonably believe that the three agreements were enforceable then knowledge of the contents of the documents could not be said to have obliged us to notify the exchange of those contents.

Your Honours, we would submit that the Full Court was in error in concluding that we contravened section 674(2) without addressing the issue correctly. May we submit, with respect, that a miscarriage of justice would have occurred or be occasioned if section 674(2) cannot be reconsidered by the Court to enable it to be dealt with properly. We are liable for pecuniary penalties for a contravention of the provision. Your Honours, those are submissions. We rely of course on our written submissions.

FRENCH CJ: Yes. Thank you, Mr Jackson. Yes, Mr Myers.

MR MYERS: Thank you, your Honours. I wish to deal with two matters in the light of what has been put by Mr Jackson. The first will require me to refer to some of the evidence and I also wish to say something about section 180 of the Act, imposing duties upon directors. The way in which the case was put below and in the Full Court on behalf of ASIC is clear from paragraph 11 of the outline in the FMG appeal, the appeal Mr Jackson has just dealt with, at page 865 of the application book. If I could just ask your Honours to look at that? The case essentially requires comparison between the terms of the framework agreements and FMG public announcements:

The gravamen of ASIC’s case is that, if such a comparison is performed, the discrepancies between the framework agreements and the announcements is obvious, and no reasonable person could have honestly believed that the announcements accurately described either the terms, or the legal effect, of the framework agreements.

Now, if your Honours could look in volume 2 of the application book in the matter in which I appear at page 21 in the reasons for decision of the then trial judge, paragraph 49 – one can leave aside the first sentence:

Their content, –

this is documents –

combined with other evidence, demonstrates that there was no basis for ASIC to assert dishonesty on the part of FMG, its board and in particular, Forrest. I make the same criticism of the description applied to FMG and by implication its board and particularly Forrest in the way ASIC’s case was opened. It was asserted that FMG engaged in a concerted and designed course of conduct in which it made false, misleading and exaggerated statements to the ASX of which Forrest was the architect. In my view the evidence does not support such serious allegations. The principal basis, it seems, depends on ASIC’s submission that the framework agreements are self-evidently not binding build and transfer agreements. I rejected that argument. I consider that there was a reasonable basis for FMG, through its board, including Forrest, to have held the view that the framework agreements were binding as claimed. It was supported by Huston’s professional oversight –

Now, the approach of the Full Court was not to examine any of the evidence which the learned trial judge examined in great detail, and we say as bluntly as this that that was a denial of natural justice to Mr Forrest. It was necessary to take a broad and exact survey of that evidence. The case that was put on behalf of Mr Forrest, both below and before the Full Court was, especially when one looks at the documents which were central to these issues, one was driven to the view that Mr Forrest, in fact, held a reasonable belief that the agreements were binding.

Let me just refer to some of that evidence. First of all, the oral evidence of Mr Heyting – this is dealt with in our submissions in paragraph 22. I do not want your Honours to necessarily read it for the moment, but in reply also in paragraphs 4 to 9. Mr Heyting was a senior officer of FMG. He was called by ASIC. He was hostile to FMG and to Mr Forrest. He was given the job of drafting each of the contracts. In particular, he drafted the first contract dealing with the railway line. He was not a lawyer. He was an engineer who had done a course in commercial law, but he said that he was experienced in these matters.

At this time FMG had barely left Mr Forrest’s drawing room. It is a vast corporation now, but it was a company that was conducted, and of course shortly before these events, from Mr Forrest’s lounge room. He did not have a team of lawyers on hand and Mr Heyting got the job of drafting the contract. Mr Heyting thought that the contract was binding and enforceable. He said in his evidence he compared the release of 23 August and the contract and made some changes to the release to make sure that it conformed with what he believed to be the meaning and effect of the contract, and he gave evidence that he considered the releases to be accurate.

Later he wrote letters referring to these documents as contracts, and two examples of those letters are found in the supplementary papers that are before the Court at page 15 and pages 18 to 20. Again, if your Honours wish to look at them, I can refer to them. Page 15 – this is to Mr Field who was a man who was responsible for preparing press releases. He was an independent public relations expert:

My limited comments

To use the word “binding contract” is almost a double negative, ie it’s a contract which is by its name binding so using the phase binding contract implies we are uncertain that it is actually binding.

He was correcting the press release that Mr Field was suggesting. At page 18 Mr Heyting is sending a letter to some persons at one of the contractors and he says:

Richard

As indicated previously there are two tasks going in parallel, the Definitive Feasibility Study (DFS) for financial close and contracts for implementation.

He was referring to them as contracts, and that letter goes on for some pages, but I do not want to take your Honours to any other part of it. The Full Court simply does not refer to Mr Heyting’s evidence or any of these matters. They were put to the Full Court. They were put in writing and they were put orally.

Secondly, ASIC called Mr Kirchlechner, the only other executive of the company, or senior executive of the company, who was called. He was also hostile to FMG and Mr Forrest and he agreed the releases, the press releases, reflected his understanding of the contract. The Full Court did not refer to that. There was evidence that a subcontractor, Barclay Mowlem, took the view that the contracts were binding and the releases were accurate. They had copies of the agreements and formed these views. The Full Court does not refer to that evidence.

Before the Full Court, as well as our written submissions, we handed forward a list of 122 documents, which we asked the court to consider on this question of a belief about whether the contracts were actually binding, and not one of those 122 documents is referred to in the reasons of the Full Court.

FRENCH CJ: How would you characterise the Full Court’s logic underpinning the finding that the releases were misleading or deceptive?

MR MYERS: I am sorry, how do I characterise it?

FRENCH CJ: Yes, how do you encapsulate, perhaps is the better word, the logic the Full Court used, because that characterisation does not depend on deliberateness?

MR MYERS: The logic was that – I think I got your Honour’s question – the logic was that if one reads these agreements one forms the conclusion that they were not binding, and hence, no one could believe honestly that they were binding. It could not be any other basis of proceeding because the Full Court simply did not refer to any of the documentary evidence. Could I take your Honours to the supplementary volume again to page 4? This is a particularly important document which the Full Court was taken to and they did not mention. It is the minutes of a director’s meeting held on Friday, 27 August 2004 of Fortescue Metals. On page 4 one sees item 6:

Update from Chairman on recent China trip.

Second sentence –

A key topic was the binding agreement signed with China Railway Engineering Corporation “CREC” whereby CREC will deliver a fully commissioned iron ore railway on a fixed price, fully warranted basis.

Almost contemporaneous with the release. Your Honour, those observations in the minutes of the company are consistent with what was said at the press conference on 23 August. They are consistent with the release. They are consistent with what Mr Heyting said. They are consistent with what Mr Kirchlechner said, and ASIC in its submissions to the Full Court dealt with that statement by saying that was merely Forrest’s opinion. We say, yes, it was Forrest’s opinion, we agree, it was Forrest’s opinion, and we in our written submissions in reply refer in particular to where that was said.

The Full Court referred only to one document; that is the document that our learned friend took you to at paragraph 136 of the reasons for decision. It was a document that was brought into existence in a particular context and we say, with respect, by its terms and in its context it does not support the Full Court’s decision. To the contrary, what it is about is the next step in some negotiations whereby it was hoped by Forrest that China Railway, otherwise known as CREC, would take responsibility for the overall performance of the three subcontracts. It is not dealing with the enforceability of the contracts at all.

One can see that, we say, on its terms, and moreover, if one puts it in the context of previous correspondence, which time prevents me taking your Honours to, it is quite clear that it is limited to that particular subject. The Full Court also said that Mr Forrest took no steps to ensure that the opinions that he expressed were reasonable. We say, to the contrary, he did. There were a great many steps taken by employees, two of whom I have mentioned. Mr Forrest did not attempt to disown the actions of those employees. In this organisation what was done by employees for the chief executive and the chairman can be treated as being done by him. It was done at his request. That is the case of Mr Heyting drafting the contract and checking the release.

He, as my learned friend said, sought the approval of CREC and the other Chinese parties to the releases. On page 1 of the supplementary volume one has some documentary evidence of that. Friday, 20 August Mr Forrest says:

Confirmed with Mr Bai direct. Ours is binding.

That is a reference to the CREC agreement. Mr Bai was the chief executive of China Railway. He discussed the matter with the board. He had the releases examined by officers of the NDRC, the highest authority within China for the regulation of economic affairs. The releases were circulated among people at FMG. Mr Huston, an experienced lawyer, was brought on board, as was said, on 3 October. Could I take your Honours to page 12 in the supplementary materials? About line 6:

Firstly, a big welcome to Peter Huston who joins our team . . . none [too] soon.

He is a lawyer. Over the page under the heading:

3. Legally binding contracts.

There are many agreements yet to be negotiated and settled and many already written which would benefit from being rewritten (to ensure bankable standard – then Data Room lodgement).

Some agreements have been written in an ad-hoc way with the best means available to the executive responsible. Unfortunately, on a full Bankers legal due diligence some of these may not pass the enforceability test.

Gentlemen, please ensure with Peter complete legal enforceability on the agreements that we are all relying to construct FMG.

Thereafter, as the evidence called below showed, a Mr Walsh at ASX who was called to give evidence spoke with Mr Huston before the November press releases about the terms of the press releases, and one may infer that Mr Huston, in those circumstances, gave his opinion that the press releases were enforceable and binding. That was the subject of discussion with an ASX officer. In any event, plainly in January that was his opinion at supplementary book page 21, minutes of a board meeting.

FRENCH CJ: Now, this is all going to the asserted failure of the Full Court to have regard to evidence?

MR MYERS: It is, your Honour, and I know that that is not something that is nice or convenient, but this is a very important matter for my client and he had the benefit of a judgment below where the judge did go to all the evidence and reached a completely different view to that of the Full Court, and the Full Court did not refer to any of this evidence. They apparently proceeded on the basis that if someone read these binding agreements, these agreements, they would form a conclusion that - - -

FRENCH CJ: Well, that goes to the basis upon which they characterised the conduct as misleading or deceptive, and if they characterise the conduct as misleading or deceptive on the narrow basis which you propound then all of this other material falls away. It was simply a question whether it was binding or not binding, as a matter of law.

MR MYERS: Well, my client has a defence that he acted reasonably.

FRENCH CJ: There may be a leave point in that. I am just not sure how, if that is the premise upon which the Full Court is operating properly understood, how this material bears upon that approach.

MR MYERS: I do not want to repeat what my learned friend, Mr Jackson, said about that subject, but we say that that was an incorrect approach.

FRENCH CJ: Of course, I understand that, that is what your position is. It is just that you are putting that premise to one side and running a kind of natural justice argument with the evidence they did not consider.

MR MYERS: Well, I am adopting, of course, what is said on behalf of FMG. Quite apart from that, under the subsection of 674 that gives Mr Forrest a defence, this is crucial. Could I say something about section 180 before the bell goes? If I can take your Honours to page 496 – I am sorry, 438 of the application book, volume 2? While I am turning that up, your Honours, the way in which ASIC put its case under section 180, the way it pleaded it and the way it put it was quite simple. What it said was that contraventions of 1041H and 674 were a platform for proceedings under section 180. They said:

“The case against the company of misleading conduct is the platform for contending that Mr Forrest breached his duties under section 180 as a director. Section 180 attracts civil penalty consequences . . . We seek no penalties against Fortescue in respect of that conduct. It is the platform for a complaint against Mr Forrest.”

Now, that is the way the matter was pleaded to. It is evidently, we say, insufficient to make a case under section 180 to simply establish that there was a breach of other sections. One has to look at the terms of section 180 itself to see whether there is, in fact, a breach. Your Honours would have page – at paragraph 198 the Full Court said:

It is not an intention lightly to be attributed to the legislature that a director of a company might lawfully decide, as a matter of business judgment, that a corporation under his or her direction should not comply with a requirement of the Act.

Then they decided, in effect, that a decision not to comply with the requirement of the Act does not fit within the business judgment defence; that is, not to make a business judgment. We say two things about that. First, that is a mischaracterisation of what Mr Forrest did. He did not make a decision not to comply with the Act. He made the decision to do something in the course of business which did not comply with the Act.

Secondly, it is an undue restriction upon the scope of this defence. There is no warrant for suggesting that the words of the business judgment defence are limited in that way. That limitation is not found in any way in the terms of the statute. The best that the Full Court could do is refer to a rather ambiguous statement in an explanatory memorandum, and so that is a point of law of considerable significance. Secondly, going to paragraph 199 this is said:

A separate but related answer to Forrest’s attempt to rely upon the business judgment rule is that s 180(2) cannot be construed as affording a ground of exculpation for a breach of s 180(1) where the director’s want of diligence results in a contravention of another provision of the Act and where that other provision contains specific exculpatory provisions enacted for the benefit of the director.

Again, there is no warrant for that limitation. They are words that are not found in the Act. Section 180 provides for a separate liability upon the discrete grounds, the distinct grounds that are provided for in section 180(1). There is no reason to say that one cannot rely upon subsection (2) simply because there is another provision which is also breached, which has an exculpatory proviso, which is not satisfied.

Section 180 needs to be looked at by itself, and that is another, with respect, serious error of construction of an important provision. More than that, the Full Court is simply wrong because the primary provision that they are relying upon is section 1041H which does not have an exculpatory provision at all. So, not only do we say that there is an issue of construction of section 180(2) raised there by those words, but the factual basis upon which the court has proceeded is not correct. If your Honours please.

FRENCH CJ: Thank you, Mr Myers. Yes, Mr Young.

MR YOUNG: May it please the Court. In our submission, this case was determined on its facts. The identified special leave questions either do not arise or they do not raise any question of law of general importance and they do not raise any questions which will affect the result of the case. What the Full Court did in terms of the characterisation of the public statements was to apply long established principles to identify what would have been conveyed to a reasonable recipient. They identified what would be conveyed as a matter of historical fact, that is to say the agreements contained terms as summarised in the announcements and I will go to the passages in a moment.

On that footing the Full Court then compared what would be conveyed as fact with the actual content of the framework agreements. It found that there was a gross disparity and that what was conveyed was misleading. That question of characterisation is simply a question of fact, as this Court held in Campbell v Backoffice and Butcher v Lachlan Realty. In relation to section 674(2) the Full Court found that the directors of FMG and FMG itself were in possession of information being the actual terms of the actual framework agreements, and further they rejected the trial judge’s finding that there was any basis for a reasonable belief that what was announced to the market was accurate, that they were factual findings.

FRENCH CJ: Do you accept the simplistic proposition perhaps that I put to Mr Jackson based on paragraph 189 that the Full Court seems to have treated the non-disclosure as the flipside of the misleading or deceptive conduct?

MR YOUNG: No, with respect, that is not an accurate reading of the judgment, your Honour, and I will try and demonstrate why. Can I deal firstly though with the section 1041H issues very briefly, before I go to that?

FRENCH CJ: Yes.

MR YOUNG: The framework agreements are conveniently summarised in Chief Justice Keane’s judgment, that is volume 2 in the FMG appeal, page 370 to 371, and they juxtapose the announcements – or his Honour does – in the following pages. I want to make an observation about the framework agreements, your Honour. It is quite clear that the principal operative provision is clause 1.1:

The parties will jointly develop and agree on the following –

and then one looks at the list of the matters that are yet to be agreed, but reserved for the parties to agree themselves. The first is –

• a General Conditions of Contract suitable for a Build and Transfer type contract in good faith.
• The Scope of the Work to be included in the Contract.
  

Skipping the next one, after that it is the design and the scheduling and then –

• Determination of the Value of Works
  

Explicitly, those matters are reserved for the parties themselves to agree. That is not altered by 1.2 because that is a facultative provision under which FMG will get some expert assistance. The works are not further defined other than by general description in 2.1, it is simply an inclusionary description. The same can be said of the next paragraphs in section 2. 3.1 is not an agreement upon price or an agreement to pay a reasonable value. It is simply an agreement to include a particular structure for the price, if and when it can be agreed by the parties themselves.

Further, there is no warranty of any kind, contrary to what Mr Forrest said to the board of directors at the 27 August meeting that the Court was taken to. That is apparent from the last bullet point in 3.1. So to the extent it was intended to be binding it was a binding framework, as the title suggested, under which the parties reserve for themselves the process of developing and agreeing upon the matters essential to give rise to any kind of binding commitment to build and transfer. That is to be contrasted with the releases at page 375 of this volume; the first release is set out. It is sufficient to refer to the first and second paragraphs. The nature of a build and transfer contract is described in the fifth paragraph, a common form international construction or an industry type contract. Four paragraphs from the end of the page:

Finalising this contract with CREC now paves the way to finance the rest –

The Full Court referred to that as part of the context in which the announcements would have been understood. On the next page, opposite line 20, the Full Court again pointed to this provision of the releases:

full risk under a fixed price agreement –

The Full Court, Chief Justice Keane with the others agreeing, said specifically:

that there was no reasonable basis for the claim –

to be made. That is paragraph 150 in his Honour’s judgment. The letter of 5 November announcing the other two contracts is similar. At 378, just before line 40:

commit Chinese financing and construction –

At 379 between lines 10 and 20, “will provide a financing,” “has committed to the financing,” “will provide the financing”. Now, in terms of what was conveyed, and that is the standard test, Fortescue attempts to set up two extreme positions. They effectively say in their written submissions it is a choice between a statement about a contract always representing facts, historical facts about its contents, versus on the other hand the trial judge’s view it is necessarily no more than an opinion.

Now, the Full Court rejected those two extremes. That is apparent in Chief Justice Keane’s reasons, paragraph 100 at page 406 the Chief Justice starts his discussion of the trial judge’s view that it is necessarily an opinion and no more. His Honour discusses first common law cases. Then at 106, at page 409 at paragraph 106, his Honour applies a standard approach:

what ordinary and reasonable members of the investing public would have understood from FMG’s announcements.

At 112 his Honour emphasised that it is not a choice between two extremes. His Honour’s conclusion at 117, and this answers your Honour the Chief Justice’s question about how in fact it was characterised by the Full Court, at 117 his Honour says:

The gravamen of FMG’s announcements, both in August and in November, was that the parties had agreed upon terms summarised in the announcements.

Then more explicitly at the end of that paragraph on the next page, the last four lines, they –

were statements which would not be understood as statements of opinion as to which a contrary view was also reasonably open. Rather, they would have been understood as conveying the historical fact that agreements containing terms accurately summarised in the announcements had been made between the parties.

So that is the question of characterisation and that is a question of fact. In our submission, the Full Court’s characterisation is plainly correct, or at least it is not open to serious doubt, but none of that raises a special leave question. As to Global Sportsman can I go back and deal with what Mr Jackson said about that? Chief Justice Keane deals with it at paragraph 107. The judge cited Global Sportsman for his conclusion that these announcements were to be regarded as no more than an opinion, necessarily an opinion, and no more.

The Chief Justice sets out that finding at 107 and then rejects that approach to Global Sportsman at 108 on the grounds that Global Sportsman was speaking of a statement which was identifiable to the audience as such. It did not follow from Global Sportsman that statements about a contract were necessarily only opinions. There is no error in that approach. The court made it clear that there is no absolute rule from one set of facts to another. It depends on the characterisation of what would be conveyed, which depends on the particularities of what was said and what the context was. So, in our submission - - -

FRENCH CJ: It is not a case of opinion or not opinion; there are opinions and there are opinions. An opinion may convey “I think”, and you do not take it very seriously, or an opinion may convey “I have taken advice and seriously considered that”.

MR YOUNG: Yes, exactly, your Honour; that is true. But the trial judge found that these statements were unqualified and assertive and made in a serious context of market disclosures. There was nothing to qualify them and nothing to take away the fact that they would convey matters of historical fact to the audience. They would convey that the terms were as accurately summarised in the announcements, and that is what the Full Court said. That being so, that being the proper characterisation, in our submission, the Full Court rightly concluded that the statements were misleading having regard to what the underlying reality was.

Can I turn then to the question of reasonable belief. Can I say, firstly, on the Full Court’s approach, having identified and characterised what was conveyed, questions of reasonable belief do not really arise in the context of section 1041H. If fact is conveyed and those facts are inaccurate then it is misleading. Reasonable belief principally arises in the context of the defence to the 674 contravention. What was said to your Honours is, in our submission, inaccurate. The Full Court did deal extensively with the trial judge’s findings about reasonable belief and squarely rejected them.

Chief Justice Keane started the process of dealing with those matters at paragraph 64 of his judgment. That is page 395. The trial judge’s findings about reasonable belief are set out. They depended centrally and fundamentally upon the finding that FMG had relied upon legal oversight and advice from a Mr Huston. That appears at line 30 in the trial judge’s extract. Then it is elaborated by the trial judge and it is reiterated by the trial judge in the passage quoted in Chief Justice Keane’s paragraph 69, about the last six lines:

I consider that there was a reasonable basis . . . It was supported by Huston’s professional oversight to ensure the legal enforceability of FMG’s agreements as well as his later positive advice to the effect that they were such.

There was a reference to Forrest’s knowledge of another case of a very different character. All of those matters were squarely rejected by the Full Court. At the bottom of paragraph 67, the last two lines, and then paragraph 68 – “there was no evidence” of legal oversight or advice from Huston is the effect of paragraph 68. Then his Honour expresses the conclusion at paragraph 70, the last four lines:

ASIC points out, correctly, that no inference could be drawn that Mr Huston gave FMG legal advice supporting the reasonableness of FMG’s public statements at some earlier point in time –

that is, on 22 January or 30 March being the only documentary references to Huston giving advice –

there was no evidence which would have supported that inference.

As to the minutes of 22 January and the email from Huston of 30 March, long after the relevant events, neither of them went beyond asserting that, rather than being an MOU, this was a binding framework agreement. None of them address the critical question whether there were, within that agreement, binding obligations to build and finance, as claimed by the announcements. So those two documentary references do not address the relevant issue.

Next the Chief Justice turned to evidence contradicting the finding of honest and reasonable belief, first at 136 at page 420. It commences with discussion of some documents. It is introduced by 135, saying in the middle of that paragraph:

subject matter, scheduling and price, was explicitly left to be agreed between the parties.

Then Chief Justice Keane sets out the 27 October email from Forrest. The content is inconsistent with the proposition that Forrest believed there was a binding agreement to build and finance. If the Court looks at the extract on the next page, 421, between about lines 15 and 20. Then the Chief Justice turned to the negotiation of the advanced framework agreements. The primary judge had referred only to a minor change in a recital. Chief Justice Keane points out that the exchanges revealed that there was no agreement about price or value. That is set out at pages 424 to 425. Paragraph 143 sets out Fortescue’s proposal about a valuation provision. The Chinese response is to reject it, to delete it entirely, and to say the obligation is on FMG to arrange finance. That is 145. His Honour then points out in 147:

far from showing that the Chinese contemplated an agreement by which they were bound to secure financing . . . they firmly believed securing finance was an issue for FMG.

Over the page at 150 – that is at page 426 – his Honour, in our submission, rightly concluded that the evidence showed “that the price was left at large for further negotiation”. That is the fourth line of 150. His Honour continued:

These differences also show that there was no reasonable basis for the claim . . . a “fixed price” -

which was one of the elements of the first press release. If I jump back a little bit, another item that his Honour refers to is the press conference at paragraph 87 at page 403. On the day of the first release Forrest gave a press conference in which he told journalists and analysts that:

the price was . . . “confidential” but “competitive”.

Of course, that was consistent with what was publicly said – there was a fixed price – but it was not the reality. His Honour referred to that matter again at 194 as bearing upon the reasonableness, or lack of “reasonableness, of Forrest’s belief”. That is the last sentence at page 440 within paragraph 194. Then if I jump back to page 426, the Chief Justice summed up the effect of this other documentary evidence in paragraph 151 in two propositions. First, it:

shows how far the parties were from a real consensus on subject matter and price –

The second proposition is even wider:

not the slightest hint of an expectation –

that there would be a third party determination, and:

it strongly suggests “that it was not in the contemplation of either party that they were to be bound [to a contract to build and transfer –

and finance. In our submission, what the Chief Justice has done is to reject the finding of reasonable belief. When the court turned to section 674, these passages were referred to but without repeating them. That appears at page 437, paragraph 186. All of these findings by the Full Court are then further confirmed by an application of these findings to the state of mind of Forrest. That is at paragraphs 190 to 194 under the heading, “The Case Against Forrest”. Paragraph 190 is the trial judge’s finding that Forrest was intimately and directly involved in both sets of documents. Paragraph 191, in the middle:

it can reasonably be inferred that [Forrest] knew of the disparity between the terms and FMG’s representations –

At 193 his Honour repeats the finding that there were no reasonable steps taken and no reasonable grounds. That is a factual finding that 674(2B) has no application. The finding is repeated that there was no legal oversight or advice which had been the fundamental plank for the trial judge’s findings. Then in 194 his Honour refers to what he had discussed earlier, that is, the proposition that Forrest had a belief is inconsistent with documents. In the middle of 194 his Honour said:

Forrest plainly did not entertain, and it may be inferred had never entertained, reasonably or at all, the opinion that the terms of the framework agreements were effective as binding agreements to build, finance –

So comprehensively the trial judge’s findings about reasonable belief were considered and rejected on the facts, on the evidence. Your Honour asked me what significance – your Honour asked, I think Mr Myers, what approach was adopted to section 674 in the light of those matters.

FRENCH CJ: Yes, I think I put it to Mr Jackson. I was looking at the first sentence in 189.

MR YOUNG: Yes. Can I deal with that, your Honour. The special leave question is question No 5. It is at page 485 of volume 3 in the Fortescue appeal. That question has two premises identified in (a) and (b). The first is the only information held by the directors was “about the true legal effect of the document” and the second is that FMG’s officers:

reasonably and honestly consider that the document has a legal effect different from its true legal effect.

In our submission, on the facts, the Full Court rejected each of those premises. In essence, the Full Court’s analysis of section 674 involved four steps. The first was that Fortescue was aware of the actual terms in the framework agreements. The second was that the announcement contained a misleading description of those terms as a matter of fact, and that is how it would have been understood by reasonable recipients.

FRENCH CJ: This, you put, is independent of the characterisation of the agreement as binding?

MR YOUNG: Yes.

FRENCH CJ: A misdescription of it?

MR YOUNG: Yes. That misdescription having been conveyed to members of the public, and Fortescue being aware of the actual terms that would have demonstrated that misdescription, the actual terms in those circumstances were material, or at least that the actual terms was likely to influence investors, therefore, there was an obligation to disclose under section 674. That is the way the Full Court approached it. The existence of beliefs is irrelevant to that exercise. It is entirely objective.

FRENCH CJ: It depends upon the characterisation as misleading or deceptive which does not turn on - - -

MR YOUNG: Yes, and the release of that misleading information into the marketplace creates new market circumstances in which you need to assess the materiality of information clearly possessed by the company – that is, the actual terms. That appears in several passages. Awareness of the actual terms perhaps I hardly need to go to, but the Chief Justice does point out that the trial judge’s approach ignored the awareness of the actual terms. It is paragraph 63, 185 and 187.

As for the application of 674(2) and those new circumstances where misleading information is released to the market, the Full Court dealt with that in several passages. At 119, firstly – I am back in volume 2, your Honour, at Chief Justice Keane, at page 414 - having characterised what was conveyed at the bottom of 117, then at the bottom of 118 the Chief Justice anticipates what he is going to say later, namely, that:

information that FMG’s announcement was erroneous would not have been likely to influence investors –

The characterisation is then repeated in 119, but then if I turn to pages 436 and 437. It is easiest to start with 184, and this is why I answered your Honour the Chief Justice earlier as I did. Chief Justice Keane says:

this is not to suggest that s 674(2) “in terms” imposes an obligation to correct information already provided to the ASX. The point is that the publication of corrective information was necessary because, in the circumstances which they obtained, that information was information which would, or would be likely to, influence investors –

That is to say, it is an objective application of 674 to the new environment in which misleading information - - -

FRENCH CJ: That has a potentially fairly universal application in relation to any finding of misleading or deceptive conduct by a publicly listed company, does it not?

MR YOUNG: Yes, but what you then need to do is to say, “There is new information in the marketplace. It is misleading.” Does that make what is still retained by the company, of which it is aware, releasable, and that depends on an application of the materiality test in 674(2) and 677.

FRENCH CJ: Does it not get close to the proposition that if a company is found to engage in misleading or deceptive conduct, that attracts, as a matter of logic, if you like, the obligation to disclose the true position, whether or not the misleading or deceptive conduct was innocent or otherwise?

MR YOUNG: One cannot express it so broadly, your Honour. It depends on what the information was that was released.

FRENCH CJ: Yes. I am only looking at that proposition from the point of view of whether we have a special leave question here.

MR YOUNG: Yes, I understand that, your Honour, but it depends on what was released, the circumstances of the company and the likely influence on investors of what is still retained by the company, if it were to be released. So it is simply a question of applying 674 again in the circumstances that are then created by the misleading disclosure. For some misleading statements they may have no materiality in terms of section 674(2) and 677, it may be a misleading statement, but it is about matters that are not likely to influence investors, nor would the correction be likely to influence investors, but when it is an announcement as here in the particular facts of the case about a major breakthrough by the company that it has now secured finance and a construction contract for the whole of its infrastructure – railway from mine to port – worth more than $1 billion then for a small mining company at that stage it is obviously material.

The Chief Justice elaborates what I have described, your Honour, at 183, in the middle of the paragraph, and then the last sentence of the paragraph 183 and also in 185. That is a reference to the awareness of terms. Then 187 and 189 are to be understood in the context that I have just explained, your Honour; 187 at the end of page 437:

one contravention . . . that was the failure to disclose the terms or the true effect –

Then, 189. That is a short summary of what has gone before, your Honour:

the misleading statements by FMG were apt to create an understanding on the part of common investors that FMG had secured the construction of the infrastructure for the Project on terms as to deferred payment. In the state of affairs –

then, a release of the actual terms would be likely to influence investors. In our submission, that analysis simply turns on the identification of the fact that the release of misleading information creates a new environment and 674(2) is to be applied within the context of that environment in accordance with its terms, and there was no dispute below but that if a company is aware of information that is likely to influence investors, it is disclosable.

As to the defences, 674(2B) was rejected by the court. Chief Justice Keane said at 193 that there was no factual basis for its application. As to section 180(1), that was rejected again on the facts. There was no dispute below but that a director who fails to exercise reasonable care and diligence to prevent contraventions of other provisions of the Act, which contraventions might jeopardise the position of the company and its shareholders, could thereby contravene 180(1). That principle was effectively common ground below. It was not challenged on appeal. The trial judge accepted it. It is at volume 1 in FMG at page 255, paragraphs 896 to 899. There is lengthy authority saying that section 180(1) can apply to a failure to fulfil duties in that sort of context.

The applicants did not dispute the trial judge’s approach by any kind of notice of contention in the Full Court, and we have referred to that in our summary. But what Chief Justice Keane did was to accept effectively longstanding authorities that had not been disputed below, either before the trial judge or before the Full Court that section 180(1) can apply to a failure to exercise reasonable care and diligence to prevent contraventions that jeopardise the position of the company.

The Forrest submissions quote from Australian Securities and Investments Commission v Maxwell inaccurately. They do not quote the whole passage. That is an authority for the proposition that section 180(1) can apply in a case like this. Then, as to subsection (2), the business judgment rule, it was determined on the facts, as page 441 indicates, at paragraph 197. His Honour sets out the elements that Forrest had to establish to make the defence:

a judgment in good faith and for a proper purpose –

no material interest – having informed himself that it was a reasonably proper action to take and rationally believing it was in the best interests of the company. They are the elements of subsection (2). His Honour observes that there was no evidence from Forrest - - -

FRENCH CJ: Your position is that there was a proper analysis of the elements of section 180 by reference to the evidence available to the court?

MR YOUNG: Yes, your Honour, and the observation that a decision to comply with continuous disclosure obligations to make a release was not to be regarded as a business judgment. That is very much secondary. That matter was not the primary basis. The primary basis for determining the point was the factual one, that in the absence of any evidence from Forrest and having regard to the findings of a lack of reasonable belief, he could not make out the defence on the facts. If the Court pleases, those are our submissions.

FRENCH CJ: Yes, thank you, Mr Young. Mr Jackson.

MR JACKSON: Your Honours, may I deal first with some submissions made by our learned friends concerning the comparison of what was said in the terms of the contract. If I could go to page 375 of volume 2, you can see there is a reference there at about line 25 to a statement that:

“BT contracts are common in the international engineering and construction industry.

Your Honours, there was no evidence which demonstrated that that was incorrect. That is the first thing. The second thing is, if you go to page 376, in a passage at about line 20, what was said was:

Under the terms of the contract, CREC will take full risk under a fixed price agreement on the rail project which Fortescue Metals proposes be held separate –

If one goes to the terms of the agreement at page 372, what my learned friends argue really does not go much to what the framework of agreement said. You will see that the framework of agreement said in clause 7 that there was to be “a fuller and more detailed agreement”. That is the agreement being spoken about in that passage, and “the fuller and more detailed agreement” was to be one which provided for the works to be valued and to be a fixed price. You will see that in clause 1.1, the last dot point. Then the method of quantification of that in the absence of agreement was, in our submission, to be determined by an independent review of the schedule and value of the works. So there would be a fixed price and the fixed price then brought into play the provisions in clause 3.1. Your Honours will see from clause 3.1 that there were to be provisions whereby all the finance, apart from the first 10 per cent, was to be provided by the other company.

The point we seek to make, your Honours, is that if one starts on the assumption that you have a framework agreement which the parties say we intend to be binding and it is one which provides for a fuller agreement then it is perfectly apparent that the terms are dealing with the works. The parties knew what the works were. They had been to Australia. They had looked at it and knew about it and had various documents. They were not talking in the abstract. Then it is apparent, in our submission, that what was said about it was correct.

The second thing, your Honours, is that if one goes to page 414 of volume 2, the conclusion, or the approach taken, by the Full Court, in our submission, is – and it is apparent from the passages which we have taken your Honours already, I think – and that is, that if it is the fact that there has been conduct which is misleading or deceptive then it follows that there is a contravention of section 674. I have given your Honours the wrong reference, I think, but I was going to say, in any event, if one goes to page 414, at about line 13, what is said is:

FMG’s statements that binding agreements had been made to build, finance and transfer the infrastructure were statements which would not be understood as statements of opinion as to which a contrary view was also reasonably open.

Your Honour, on the number of occasions on which that addition has been made as to which a contrary view was reasonably open, it skews – to use the expression I used earlier – the approach that should be taken, because what is being done is to say, “What you are asserting is that this is an arguable question”. What we were saying, your Honours, was that we believed that we had entered into contracts of this kind and the question was whether, in our submission, that belief was one that we (a) held and (b) was reasonably open.

Your Honours, I will not go into the question of the reasonableness of the belief at the moment. That is a matter for my learned friend. But could I just say this also, that if one goes to section 674(2), one does have to look at the terms of the provision. Despite our learned friend’s endeavour to do so, it is perfectly apparent, we would submit, that the course taken by the Full Court in the present case was to say because there was a breach of section 1041, it followed that there had to be a correction pursuant to section 674(2). I took your Honours to the passages earlier. Paragraph 189 says it directly. But when one comes to section 674(2), one then does have to see what the listing rule requires, because 674 is, in a sense, free standing, but it picks up the terms of the listing rule and it requires an awareness of what has to be disclosed. I will not go through it again, but your Honours will see it. It is an important question.

Your Honours, our submission is that this is a case where there have been a number of issues not adequately or correctly, with respect, decided by the Full Court and it is a matter where it is appropriate, your Honours, to - - -

FRENCH CJ: Thank you, Mr Jackson. Yes, Mr Myers.

MR MYERS: I do not wish to add anything in reply.

FRENCH CJ: Thank you. There will be a grant of special leave in this matter. What do you estimate to be the time, Mr Jackson?

MR JACKSON: Your Honour, I think it is a case that will take two days. I should mention one matter; I need a slight amendment to the notice of appeal because it was filed before the amended order made by the Full Court and all we want to do, your Honours, is to change the identification of the relevant paragraphs, the numbers have changed, that is all I - - -

FRENCH CJ: We think it might be convenient that the appellants have some time to reflect upon whether it is possible to narrow the grounds a little so that we do not drag in, as it were, an underbelly of unnecessary documentation.

MR JACKSON: Your Honour, I understand.

FRENCH CJ: So you have 14 days leave in which to do that. That obviously is not to bring anything new, it is just to - - -

MR JACKSON: I understand, yes.

FRENCH CJ: Yes, all right. Mr Myers, do you agree with that estimate?

MR MYERS: Yes, I do.

FRENCH CJ: What about you, Mr Young?

MR YOUNG: Yes, your Honour, we are a little bit concerned that because of the factual matters that look as if they are going to be reagitated it may be tight, your Honour. It may be safer to say two to two and a half days.

FRENCH CJ: Well, I will take that into account, but no doubt these matters can be dealt with in part in the written submissions and people will be concise orally.

MR YOUNG: Yes, your Honour.

FRENCH CJ: Yes, all right, thank you. We will adjourn briefly to allow the videolink to be set up for the next matter.

AT 11.03 PM THE MATTER WAS CONCLUDED