In terms of the determination of the contract of term binding, the Australian High Court’s point of view can be considered quite formidable in Forrest v ASIC (2014). The High Court of Australia’s viewpoint about the binding contract as well as the conclusion of this contract term as a deceptive and a misleading element is of prime significance in this particular case. This case commenced in 2006 when a suit was initiated in the Australian Federal Court by the Securities and Investments Commission of Australia against an organization named Fortescue Metals Group Ltd also known as Forrest and its Chairman and Chief Executive Officer, Mr Andrew Forrest. The Forrest CEO was questioned regarding proclamation to media as well as the larger public related to a Framework Agreement chain between the Forrest company and three Chinese enterprises held by the government. The main constituents of these agreements were funding and developing services that were to be delivered in relation to Forrest’s Infrastructure project and Pilbara Iron Ore.
The announcement that was made by Forrest described the specific framework agreement as a contract for the building. However, actually, the agreement’s covenants were not clear and were lacking legal enforceability character that resulting in the dismissal of ASIC’s contention by the court. After an appeal was made to the federal court’s full-court, a statement was received by ASIC that stated about the misleading and deceptive nature of Forrest’s announcements. Moreover, it was mentioned that there were violations made with respect to the part of Forrest’s disclosure. It was also observed that the powers could not be executed properly by the CEO including negligence in carrying out the responsibilities. This resulted in the violation of sections 180(1), 674 and 1041H of the Corporation Act, 2001. An appeal was made by Forrest CEO against the full court’s orders and High Court was requested to reinstate the orders made by the lower court.
The review of the High Court’s perspective was very important for comprehending the responsibilities and duties that were breached in this particular case. The consideration of the ‘Binding Contract’ term in Announcement as deceptive or misleading was decided to be analyzed by High Court. The court also analyzed the usage of this term along with considering the audience’s perception regarding the term. The main targets for the announcement were the media, investors and the majority community (Reynolds, 2016).
The Binding Contract’s literal interpretation was not properly introspected by the High Court. Arguments were made stating the ill necessity of the contract’s validation and legal enforceability while delivering the contract binding statement to the public. Moreover, arguments were also made where the necessity of assessing the enforcing the contract on a performance basis was discarded during the announcement of contract binding in public and two important facts were viewed in this relation (Tricker & Tricker, 2015). The first one viewed by the court was the arbitration of announcement related to Framework Agreement’s covenant and the second was the announcements related to opinions of parties regarding the formation of the binding contract with their respective frameworks.
The court showed faith in development intended by the audience in the connection of primary issue that might perceive some differences in parties about the agreement that could be sorted out according to the legislations in Australian legal structure. Arguments were made by ASIC stating that the Forrest’s Announcement’s Binding Contract term might indicate the regulation of Framework Agreement could have been done by Australian Legislation which was not accepted by the High Court (Beekes, Brown & Zhang, 2015). The executions of contracts were done by the Chinese government-owned firms that left no choices for the forum that was started in the contract for addressing the dispute. The Forrest was observed by the Lower court as a company that made an attempt to hide the existence of Binding Contract due to the lack of enforceability of performance. Therefore, as per the lower court, Forrest had breached the 1041H’s provisions stated in Corporation Act, 2001. However, the ASIC’s submission in this regard was rejected by the High Court as section 1041JH was breached and the Binding Contract announcement could not be considered deceptive for the audience for being outside the Australian Legislation’s jurisdictions (Marsh, 2013).
The ASIC stated that those attempts were made by the organization for changing the Framework Agreement’s terms and also suggested that proper directions were not provided to make the Framework Agreement binding. Hence, the lower court considered that the requirement for continuous disclosure as per section 674 of the Corporation Act of 2001 was violated along with the breach of the Corporation Act’s Section 1041H (Carnegie & O’Connell, 2014). However, it was viewed by the high court that negotiations that took place after the contract can’t be considered as tantamount to cancelling earlier contract and validity, as well as the commercial viability of erstwhile agreement, remains there. Negotiations did take place to enhance the contract but the deal signed earlier still remained valid. Hence, ASIC’s argument was denied by High Court (Liang & Renneboog, 2017).
The contention was made by ASIC in a lower court that Forrest CEO did not implement his roles and responsibilities with care and diligence and had let the announcement be delivered despite being misleading and deceptive. This was the reason why the lower court held Forrest CEO for violation of Section 180(1) of the Corporations Act of 2001 (Richardson, Taylor & Lanis, 2015). However, the high court rejected the contention that stated the announcement to be deceptive and misleading as it breached Section 1041H of the Corporation Act, 2001. Consequently, in this relation, the high court also rejected the violation of sections 674 and 180(1).
There were certain arguments that were made by ASIC in relation to the deceptive and misleading nature the ‘Binding Contract’ term as breaching of several sections by the organization in accordance with the continuous disclosure. It was also stated by ASIC that there were attempts made by the firm to amend the contract’s terms and the chairman, Mr Andrew Forrest failed to exercise adequate diligence and care during the publishing of the Announcement. Therefore, the firm was noted to breach Section 674 and Section 1041H of the Corporation Act, 2001, whereas the CEO, Mr Forrest had violated Section 180(1) of the Corporation Act of 2001 (Bartlett, 2015).
However, the ASIC seemed to be losing grounds on most of the arguments that were stated in the High Court because of the fact that the case’s merit was viewed by the High Court in a completely different perspective. It was observed by the high court that the arguments presented by ASIC lacked reasonable or substantial belief and the ASIC failed to establish any of the important matters related to the deceptive and misleading nature of the announcement. Hence, this petition of ASIC was rejected by the High Court. However, the case was perceived from a different viewpoint with respect to the intended audience to state deceptiveness or misleading nature of announcement for the intended audience. The case was presented by ASIC from the organization’s perspective and the disclosing of the announcement’s technical aspects. However, the analysis of the importance of the announcement along with its implication was not done by ASIC properly for the intended audience (Latimer & Latimer, 2017).
The high court’s decision was based on a wide analysis of the organization’s information regarding disclosure to the media or Australian Stock Exchange at large must consider the intended audience’s nature and the effects of information on them. This was not taken into account by the High Court that the term ‘Binding Contract’ as it was stated in the announcement might not be misleading and deceptive to the intended audience. However, for a layman that is not familiar with developments related to finance and business, this might sound like a misleading thing (von Dietze & Allgrove, 2014).
It should have been considered by the court to further emphasize the aspect of some specified technical as well as legal terms that are used in the announcement as the same can potentially be deceptive or misleading based in nature and attributed knowledge of the intended audience for whom the announcement was delivered. The general public’s nature at large is supposed to be considered as a significant element during the delivery of some announcement that might contain some particular technical as well as legal terms because of the lack of knowledge of the common public regarding business and finances and it might look like something deceptive or misleading to the general population. Therefore, the aspects related to the violations of section 180(1) as well as section 1041H by Forrest and its CEO must have been analyzed and properly introspect from this particular perspective (Taylor & Richardson, 2014).
IT was not mentioned by the High Court that the ‘Binding Contract’ term as specified in the Announcement must be summarized correctly in the terms of underlying the agreement and necessary evidence should have been substantiated with this respect. However, there are many companies and firm owners that do not take adequate care for highlighting the conditions and terms of the underlying contracts. In addition, they do not even summarize the contract terms in the event as well as they do not provide suitable evidence that can substantiate the Binding Contract that is presented along with the Announcement. In these scenarios, the announcements could be stated as deceptive as well as misleading for general people. The situations and circumstances under which any particular announcement can be termed as deceptive or misleading have not been specified by the High Court. However, it has been mentioned that the absence of summary at any event and missing the highlighting of evidence in the terms of Binding Contract can make it fall under the category of misleading and deceptive documents (Tomasic, 2016).
Despite the eventual acceptance of appeal made by ASIC from the High Court’s end, it was later concluded that the Fortescue Metals Group Ltd was not found guilty for initiating any engagement in misleading the conduct, as per to what has been mentioned in the earlier sections of 1041H of Corporation Act of 2001. Section 1041H’s provisions from the Corporate Act of 2001 that were in accordance with circumstances of misleading and deceptive nature of company made announcements were considered to analyze the duties to be performed by top-level authorities of a company including directors. The Fortescue Metals Group Ltd and its CEO Mr Forrest were finally not found guilty under Section 1041H’s provisions by the High Court. Hence, the company and its owner were not considered as liable for the violation of the provisions of Section 180(1) and Section 674 of Corporate Act, 2001.
The court’s verdict was against the claims that were made by ASIC against Mr Forrest and his Company Fortescue Metals Group Ltd. In addition to this, the court also held that every allegation that will be brought against any individual with respect to deceptive and misleading contract without having any authentic basis related to the belief is likely to fail for establishing the fact that a conductor can be turned by necessary elements exist. Hence, there will be no claim that can be made for deceptive conduct and instead there is a need to do the pleading on a separate basis for tort as well as some claims could be made. Limited transferability was mainly focused upon by the court, which further stated that the organizations that are willing to deliver information to the Australian Stock Exchange via media shall take an account of the fact that the literal meaning of the Binding Contract concept can possibly become deceptive of it is used for stating the definition of some unenforceable agreement for the common people that are usually not very much familiar to in business and finance-related matters. These firms must also take note of the fact that any specific term that has been used in communication and interaction that has some specified technical or legal knowledge can also turn out to be misleading, as per the features and depth of knowledge possessed by the general people. It is very important for these organizations to make some announcements that have the term ‘Binding Contract’ in them. These companies need to take adequate care for efficient simplification of the terms of these agreements and it should also make sure that a sufficient number of evidence is present that can project the intentional bounding nature of the parties in a clear form.
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