FEDERAL COURT OF AUSTRALIA Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19 Citation: Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19 Appeal from: Australian Securities and Investment Commission v Fortescue Metals Group Ltd [No 5] [2009] FCA 1586 Parties: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v FORTESCUE METALS GROUP LTD (ACN 002 594 872) and JOHN ANDREW HENRY FORREST File number: WAD 23 of 2010 Judges: KEANE CJ, EMMETT AND FINKELSTEIN JJ Date of judgment: 18 February 2011 Catchwords: CORPORATIONS LAW – continuous disclosure – misleading and deceptive conduct – listed company made announcements that it had entered binding agreements – agreements were merely agreements to negotiate – whether continuous disclosure obligations had been breached – whether obligation not to engage in misleading or deceptive conduct had been breached Legislation: Australian Securities and Investments Commission Act 2001 (Cth) s 19 Corporations Act 2001 (Cth) ss 79, 180, 674, 676, 677, 1041H, 1332 Corporations Regulations 2001 (Cth) r 1.0.02A Cases cited: Aaron's Reefs, Limited v Twiss [1896] AC 273 cited Australian Communist Party v The Commonwealth (1951) 83 CLR 1 cited Ansett Transport Industries (Operations) Pty Limited v The Commonwealth of Australia (1977) 139 CLR 54 cited Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 cited Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98 cited Barrier Wharfs Limited v W Scott Fell & Company Limited (1908) 5 CLR 647 Booker Industries Proprietary Limited v Wilson Parking (Queensland) Proprietary Limited (1982) 149 CLR 600 cited Briginshaw v Briginshaw (1938) 60 CLR 336 cited Campomar Sociedad Limitada v Nike International Limited (2000) 202 CLR 45 cited Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 cited Council of the Upper Hunter Valley County District v Australian Chilling and Freezing Co Limited (1968) 118 CLR 429 cited Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433 cited Franklins Pty Ltd v Metcash Trading Ltd (2009) 264 ALR 15 cited Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 cited Godecke v Kirwan 120 CLR 629 cited Gould v Vaggelas (1985) 157 CLR 215 cited GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 cited Hall v Busst (1960) 104 CLR 206 cited Hillas & Co Ltd v Arcos Ltd [1932] All ER 494 cited Hyedon v NRMA Ltd v NRMA Ltd (2000) 51 NSWLR 1 cited Jubilee Mines NL v Riley (2009) 253 ALR 67 cited Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 cited Masters v Cameron (1954) 91 CLR 353 considered Middleton v Aon Risk Services Australia Ltd [2008] WASCA 239 cited Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60 cited Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 cited National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) 49 ACSR 369 cited Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd's Rep 205 cited Thorby v Goldberg (1964) 112 CLR 597 cited Yorke v Lucas (1985) 158 CLR 661 cited Spencer-Bower, Turner and Handley, Actionable Misrepresentation (4th ed, 2000, Butterworths, London) Dates of hearing: 22, 23, 24, 25, 29, 30 November 2010 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 235 Counsel for the Appellant: Mr NJ Young QC with Mr JA Thomson, Mr DJ Crennan and Mr DR Luxton Solicitor for the Appellant: Mallesons Stephen Jaques Counsel for the First Respondent: Mr DF Jackson QC and Mr J Karkar QC, with Mr B Dharmananda, Mr RJ Price and Mr JE Hynes Solicitor for the First Respondent: Corrs Chambers Westgarth Counsel for the Second Respondent: Mr AJ Myers QC with Mr M Thangaraj Solicitor for the Second Respondent: Gadens IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 23 of 2010 ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Appellant AND: FORTESCUE METALS GROUP LTD (ACN 002 594 872) First Respondent JOHN ANDREW HENRY FORREST Second Respondent JUDGES: KEANE CJ, EMMETT and FINKELSTEIN JJ DATE OF ORDER: 18 February 2011 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The appeal be allowed. 2. The order made on 23 December 2009 be set aside and in lieu thereof: 2.1 The Court declares that the First Respondent has contravened ss 674(2) and 1041H of the Corporations Act 2001 (Cth). 2.2 The Court declares that the Second Respondent has contravened ss 180(1) and 674(2A) of the Corporations Act 2001 (Cth). 2.3 The respondents pay the applicant's costs of and incidental to the proceeding. 3. The matter be remitted to a judge of the Federal Court of Australia. 4. The respondents pay the appellant's costs of the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 23 of 2010 ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Appellant AND: FORTESCUE METALS GROUP LTD (ACN 002 594 872) First Respondent JOHN ANDREW HENRY FORREST Second Respondent JUDGES: KEANE CJ, emmett AND finkelstein jj DATE: 18 february 2011 PLACE: PERTH REasons for judgment Keane CJ: 1 This appeal arises out of events which occurred in 2004 and 2005 in relation to a mining project in Western Australia known as the Pilbara Infrastructure Project (the Project). The first respondent, Fortescue Metals Group Ltd (FMG), intended that the Project would consist of a mine in the Pilbara region, a port at Port Hedland, and a railway to connect the mine to the port. 2 FMG is a publicly listed company on the Australian Securities Exchange (ASX). The second respondent, Mr John Andrew Henry Forrest (Forrest), is chairman and chief executive officer of FMG. He is also a substantial shareholder. The appellant, the Australian Securities and Investments Commission (ASIC), alleges that the respondents engaged in conduct contrary to the Corporations Act 2001 (Cth) (the Act) in relation to FMG's public disclosures relating to the Project. 3 In early 2004, FMG and Forrest entered into negotiations with three Chinese companies in relation to the construction of the mine, port and railway. The negotiations led to the execution of three agreements with, respectively, China Metallurgical Construction (Group) Corporation (CMCC), China Harbour Engineering Company (Group) (CHEC), and China Railway Engineering Corporation (CREC) (collectively, the "Chinese Contractors"). These agreements are referred to as the "framework agreements". The CREC agreement was signed on 6 August 2004. The CHEC agreement was signed on 1 October 2004. The CMCC agreement was signed on 20 October 2004. 4 In August and November 2004 FMG gave information about the Project to the Australian Stock Exchange Limited (as the ASX was then known) in the form of letters and media releases. They were: A letter from FMG to the ASX dated 23 August 2004, "the 23 August letter", and FMG media release dated 23 August 2004, "the 23 August Media Release" (relating to the CREC Agreement) A letter from FMG to the ASX dated 5 November 2004, "the 5 November letter", and FMG media release dated 5 November 2004, "the 5 November media release" (relating to the CHEC Agreement and the CMCC Agreement); and A letter from FMG to the ASX dated 8 November 2004, "the 8 November letter", relating to all three framework agreements. 5 These letters and media releases stated that FMG had executed binding agreements with each of CREC, CHEC, and CMCC to build, finance and transfer the railway, port and mine for the Project. 6 This information was repeated in a number of subsequent publications by FMG. These publications are listed in the appendix which is Schedule A to these reasons. The most important of these publications involved an announcement at a press conference held after publication of the 23 August 2004 releases when Forrest said that the price of the railway line was "confidential but we are pleased to say it is competitive". 7 FMG requested trading halts before it made the announcements on 23 August and 5 November 2004. FMG's share price rose over the period covered by the announcements from a price of 59 cents at the close of trading on 23 August 2004 to a price of $1.93 at the close of trading on 9 November 2004, and then to a closing price of $5.05 on 23 March 2005. 8 In March 2005 an article was published in the Australian Financial Review (the AFR Article) which asserted that the framework agreements did not impose any legally binding obligations on the Chinese Contractors to build, finance and transfer the railway, port and mine. The share price fell after the publication of the AFR Article. Since that time, FMG's share price has improved on the closing price at 23 March 2005. 9 A copy of the CMCC agreement was provided by FMG to the ASX on 29 March 2005 and copies of the other two framework agreements were provided to the ASX on 30 March 2005. 10 In March 2006, ASIC brought proceedings alleging that FMG had engaged in misleading and deceptive conduct under s 1041H of the Act, and under s 52 of the Trade Practices Act 1974 (Cth) (the TPA), by falsely representing to the investing public that the framework agreements were enforceable agreements to build, finance and transfer the railway, port and mine. ASIC alleged that s 1041H of the Act was contravened by each of the publications referred to above, and in the 16 other publications referred to in Schedule A to these reasons. Only declaratory relief was sought against FMG for the alleged contraventions of s 1041H. That is because s 1041H is not a civil penalty provision: see s 1317E. But the contraventions of s 1041H are alleged against FMG as a stepping stone toward the conclusion that FMG contravened s 674(2). The contravention of s 1041H and s 674(2) are, in turn, used as stepping stones toward the conclusion that Forrest contravened s 180 of the Act. 11 ASIC put its case of contravention of s 674(2) of the Act in a number of ways. First, it contended that FMG had failed to disclose the terms or true meaning of the framework agreements. Secondly, and in the alternative, ASIC asserted that FMG in purporting to comply with s 674(2) breached that provision by making inaccurate disclosure. Thirdly, and in the further alternative, ASIC asserted that FMG breached s 674(2) in failing to correct FMG's earlier mis-statements as to the terms of the framework agreements. Declarations and pecuniary penalties were sought against FMG in respect of the alleged contraventions of s 674(2) of the Act. ASIC claimed that FMG failed or omitted to disclose the material terms or true legal effect of the framework agreements over the following periods: for the CREC agreement, from 23 August 2004 to 30 March 2005; for the CHEC agreement, from 5 November 2004 to 30 March 2005; and for the CMCC agreement, from 5 November 2004 to 29 March 2005. 12 ASIC alleged that Forrest was involved in FMG's contravention of s 1041H and s 674(2) because he authorised or approved the letters and media releases. As a result of his involvement in FMG's contravention of s 674(2), ASIC also alleged that Forrest contravened s 180(1) of the Act because his conduct was in breach of his duty to FMG in that it exposed FMG to pecuniary penalties. ASIC sought pecuniary penalties against Forrest and an order under s 206C or s 206E of the Act disqualifying him from managing a corporation. 13 The trial judge comprehensively rejected ASIC's case. His Honour held that FMG had not contravened s 1041H of the Act because its statements about the framework agreements were necessarily statements of opinion as to their legal effect, and FMG's directors, including Forrest, honestly and reasonably held the opinion they expressed. His Honour also held that FMG did not contravene s 674 of the Act because it honestly and reasonably believed that the framework agreements bound the parties to build, finance and transfer the railway, port and mine. On that basis, it did not have the information which comprises the contrary view for the purposes of s 674 of the Act. Accordingly, it was not obliged to disclose that information. 14 In consequence of the trial judge's rejection of ASIC's case against FMG, its case against Forrest also failed. 15 ASIC's principal grounds of challenge to the decision of the trial judge are: that his Honour erred in treating FMG's public statements as statements of matters of opinion; that his honour failed to appreciate that FMG's public statements about the framework agreements were misleading in describing them as binding contracts for the construction of the mine, railway and port when they did not contain agreed terms as to price, subject matter, or scheduling, but provided only for further negotiations with a view to agreement upon such terms; that his Honour erred in concluding that the opinion which he ascribed to FMG and Forrest was genuinely and reasonably held by them. 16 I should note here that, at trial and in this Court, the case was complicated by ASIC's presentation of a number of arguments. Some of these arguments are strong, while others are not. The presentation of a range of alternative arguments is not apt to aid comprehension or coherence of analysis and exposition; indeed, this approach may distract attention from the central issues in the case. It may be that at trial both sides concentrated upon issues relating to the honesty and reasonableness of FMG and Forrest, whereas, in this Court, the parties' focus shifted to an objective assessment of the conduct of FMG and Forrest. I propose to begin my analysis with a summary of the principal claims made by ASIC at trial: that will involve reference to the terms of the framework agreements, FMG's statements to the ASX and to the public, the relevant terms of the Act and those aspects of the factual background necessary to an understanding of the arguments agitated in this Court. I will then state the conclusions of the trial judge in greater detail. I will then summarise the arguments advanced in this Court, before proceeding to a consideration of the arguments necessary to the resolution of the appeal. ASIC'S CASE The framework agreements 17 The CREC framework agreement was in the following terms: FRAMEWORK AGREEMENT AN AGREEMENT made the 6th day of August 2004 BETWEEN Fortescue Metals Group Limited (ABN 50 002 594 872) of Fortescue House, 50 Kings Park Rd, West Perth, in the State of Western Australia, Australia with its successors and assigns (the "FMG"). AND China Railway Engineering Corporation, Block B, CREC Mansion, Southern Square, Beijing West Railway Station, Beijing, in the Peoples Republic of China of [sic] with its successors and permitted assigns (the "CREC"). RECITALS A. CREC has 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") for the Pilbara Iron Ore and Infrastructure Project (the "Project") and the FMG is relying on the CREC's representation. B. CREC, having closely examined all proposed documents, has submitted an offer to execute the Works and the FMG has accepted the CREC's offer and the parties now wish to evidence their agreement. C. CREC will confer with the Chinese government to determine whether CREC will also be authorised to carry out the works associated with the port and mine infrastructure for the Project. THIS FRAMEWORK AGREEMENT WITNESSES as follows: 1 FRAMEWORK 1.1 The parties will jointly develop and agree on the following: • 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. • List of nominated Australian and Chinese joint venture partners and/or subcontractors. • Definitive engineering design (to Australian Standards). • Scheduling of the Works. • Determination of the Value of Works 1.2 The Parties agree that the following scope of work will be undertaken by FMG and CREC shall cooperate with FMG to undertake this work: • Technical peer review. • Independent review of the schedule and value of the Works. 2 SCOPE OF WORK 2.1 The Works include the following: • Earthworks for the formation including level crossings. • Civil works associated with the construction of culverts and bridges. • Above track works including ballast, sleepers, ties and rail. • Signals and communications. • All rolling stock with the exception of locomotives. Detailed Engineering, Procurement and Construction 2.2.1 The Parties agree that the following scope of work is to be included in the Agreement: • Detailed engineering design (to Australian Standards). • Project management and scheduling of the Works. • Procurement, construction and commissioning of the Works. 2.2.2 The Parties agree that the following scope of work will be undertaken by FMG and CREC shall cooperate with FMG to undertake this work: • Technical review. 3 GENERAL CONDITIONS OF CONTRACT 3.1 The Parties agree that the following will be included in the General Conditions of Contract: • FMG will provide security to CREC in the form of a JORC classified resource to the value of the Works. • FMG will make a down payment of 10% of the value of the Works in exchange for a bank guarantee of the same value from CREC. The bank guarantee to be returned when the parties agree 10% of the Works have been completed. • Remaining payment terms are: • 10% upon issue of Certificate of Practical Completion. • 15% on the first anniversary of the issue of the Certificate of Practical Completion. • 15% on the second anniversary of the issue of the Certificate of Practical Completion. • 50% on the third anniversary of the issue of the Certificate of Practical Completion. • Standard liquidated damages and performance bonds clauses shall be included. • CREC will issue a bank guarantee(s) to an agreed value to cover any warranty period that shall be mutually agreed. 4 SCHEDULE CREC has agreed to assist FMG to accelerate the procurement of materials, equipment and their technical understanding of the relevant Australian Standards and work practices inherent in this Project such that the target delivery date for first shipment of ore is last quarter 2006. To expedite the Works CREC have agreed to supply sufficient engineering support from the signing of this Agreement such that it will allow CREC to competently expedite its role in the provision of the Works. 5 APPROVAL This agreement will become binding upon the approval of both the Board of Directors of CREC and the Board of Directors of FMG. Such approval must be given before 31 August 2004. 6 RELEVANT LAWS This agreement will conform with all relevant Australian and Chinese laws and regulations. Any difference that may exist will be negotiated in good faith and will not impact the effectiveness of the other clauses. 7 FURTHER AGREEMENTS 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. 8 IN WITNESS whereof the parties have signed this Agreement. [Signed for and on behalf of FMG by Chairman Andrew Forrest and signed for and on behalf of CREC by Vice President Bai Zhongren] 18 On the hearing of the appeal, a question arose as to whether the documents referred to in Recital B included a document entitled the Pilbara Iron Ore Infrastructure Project Prefeasibility Report (the PFS) which described in some detail the work involved in the construction of the Project. The evidence did not address this question directly. That was because it was not suggested at trial that the subject matter of the framework agreements was actually described in the PFS. That such a suggestion was not made at trial is readily understandable: the description of the works referred to in the PFS is not of the works which FMG intended to be the subject of the Project at the time of the making of the framework agreements. That is because the location of FMG's principal mine site and hence the railway between that site and the port was changed after the production of the PFS. 19 The CHEC agreement, in broad terms, is similar to the CREC agreement. The "Scope of Work" clause, however, is as follows: 2 SCOPE OF WORK 1.1 The Works include the following: • Dredging and land reclamation (spoil disposal). • Wharf and approach jetty. • Stackers, reclaimer and shiploader. • Primary screen house including storage bins, screens, feeders, etc • Wagon tippler. • Conveyors associated with the above. • General earthworks. • Additional geotechnical drilling, if required. 1.2 Detailed Engineering, Procurement and Construction 2.2.1 The Parties agree that the following scope of work is to be included in the Agreement: • Detailed engineering design (to Australian Standards). • Project management and scheduling of the Works. • Procurement, construction and commissioning of the Works. 2.2.2 The Parties agree that the following scope of work will be undertaken by FMG and CHEC shall cooperate with FMG to undertake this work: • Technical review. 20 The recitals to the CHEC Agreement were slightly different from the CREC Agreement, referring to the port rather than the railway. The recitals to the CHEC agreement were as follows: A. CHEC has represented that it has the necessary skills, personnel and equipment to successfully carry out and complete the Build and Transfer of the port related work (the "Works") for the Pilbara Iron Ore and Infrastructure Project (the "Project") and the FMG is relying on the CHEC's representation. B. CHEC, having closely examined all proposed documents, has submitted an offer to excute the Works and the FMG has accepted the CHEC's offer and the parties now wish to evidence their agreement. C. CHEC will confer with the Chinese government to determine whether CHEC will also be authorised to carry out the works associated with the port infrastructure for the Project. 21 The CMCC agreement is also generally similar to the CREC agreement. The "Scope of Work" clause, however, is as follows: 2 SCOPE OF WORK 1.1 The Works include the following: • Crushing plant(s) within the mine workings. • Overland conveyors from the crushing plant(s) to the process plant(s). • Process plant(s). • All earthworks, civil works, structural steel, mechanical, pipework, electrical and control and automation of these facilities. 1.2 Detailed Engineering, Procurement and Construction The parties agree that the following scope of work is to be included in the Agreement: • Detailed engineering design (to Australian Standards). • Project management and scheduling of the Works. • Procurement, construction and commissioning of the Works. 22 The recitals to the CMCC Agreement were as follows: A. MCC has represented that it has the necessary skills, personnel and equipment to successfully carry out and complete the Build and Transfer of the mine and the process plant (the "Works") for the Pilbara Iron Ore and Infrastructure Project (the "Project") and the FMG is relying on the MCC's representation. B. MCC, having closely examined all proposed documents, has submitted an offer to execute the Works and the FMG has accepted the MCC's offer and the parties now wish to evidence their agreement. The 23 August Letter 23 The ASX received the following letter from Mr Catlow, FMG's Chief Financial Officer, at 9:37am on 23 August 2004: China Signs to Build Railway Fortescue Metals Group Ltd ("FMG") is pleased to announce that it has entered into a binding contract with China Railway Engineering Corporation (CREC) to build and finance the railway component of the Pilbara Iron Ore and Infrastructure Project. The "Build and Transfer" (BT) contract covers the railway from the Company's iron ore tenements in the Chichester Ranges to the export hub at Port Hedland. The contract covers all earthworks, culverts, bridges, rail, sleeper and rolling stock requirements, with the exception of locomotives which will continue to be sourced internationally and may form an addition to this agreement. CREC is China's largest construction group, having constructed 40,000 kilometres of rail networks throughout the country. FMG is confident in CREC's ability to build the heavy axle load railway in the Pilbara pursuant to the BT contract. CREC plans to become Asia's top construction company within 3 to 5 years and this contract provides them with a platform for further international growth. CREC has commenced discussions with Australian based engineering and construction groups with a view to forming local joint ventures to meet its obligations pursuant to the contract. We refer to the media release on the Company's website at www.fmgl.com.au. 24 ASIC focuses upon the first two paragraphs of this letter which state that FMG has entered into a binding contract to build and finance the railway component of the infrastructure for the Project. ASIC's case of contravention of s 1041H of the Act is that the only obligation upon CREC under its framework agreement was to develop and agree upon a final agreement and that it was misleading to suggest that this was an obligation to build and transfer the infrastructure. 25 The media release referred to at the end of this statement was in the following terms: CHINA SIGNS TO BUILD FORTESCUE METALS' MULTI-USER IRON ORE RAILWAY IN THE PILBARA China's largest construction group, China Railway Engineering Corporation (CREC), has executed a binding agreement to build and finance the railway component of Fortescue Metals Group Ltd's ("ASX: FMG") $1.85 billion Pilbara iron ore project. Australian-based Fortescue Metals said it had signed the "Build and Transfer" (BT) contract in Beijing with CREC - which is also one of the world's largest rail construction groups. Speaking from China today, Fortescue's Chief Executive Officer, Mr Andrew Forrest said this contract is a major breakthrough for Fortescue Metals in its development of open access and multi-user independent railway and port facilities in the Pilbara. "This long overdue facility will liberate otherwise stranded major deposits across the Pilbara and ensure that Australia doesn't continue to lose its share of important growing overseas markets," he said. "BT contracts are common in the international engineering and construction industry. Under such contracts, the provider designs to customer specification (AS 9000), builds, commissions and then transfers the facility to the customer once agreed performance specifications have been met, an achievement known as "Practical Completion"," Mr Forrest said. The contract underwrites the project's independent rail line from Fortescue Metals' mine sites at its massive Chichester Ranges iron ore deposits in the Pilbara to Port Hedland, the export hub for the province's iron ore shipments. CREC will also source and finance the bulk of the rolling stock for the project, providing the platform for the rapid advancement of the project. "The further development of the Pilbara has until now been restrained by the lack of an independent railway system. This agreement provides for that vital new infrastructure to be built. Finalising this contract with CREC now paves the way to finance the rest of the project in a plain, vanilla manner should the Company so wish," said Fortescue's Chief Financial Officer, Chris Catlow. The rail link is the largest component in Fortescue Metal's Pilbara project which also includes a proposed A$410 million iron ore mine and $470 million in new port facilities at Port Hedland. The President of China Railway Engineering, Mr Qin Jiaming, said from Beijing today that the Fortescue Metals' contract presented an excellent opportunity for CREC to develop internationally. "This new Pilbara project dove-tails both CREC's short and long-term development strategy," Mr Jiaming said. "CREC is fully confident about its capacity to build a heavy axle load railway in the Pilbara, a project able to deliver significant economic benefits to both Australia and China," he said. The contract covers all earthworks, culverts, bridges, rail, sleeper and rolling stock requirements for the new rail line. CREC has already commenced discussions in Perth and Beijing with Australian and international engineering and construction groups (operating in Australia) with a view to including minority joint venture interests in the contract. Locomotives for the Fortescue Metals' railway will continue to be sourced internationally and may form an addition to this agreement. "This is the catalyst we have been working on to propel our Pilbara project into real-time construction, project financing and project commencement stages," Mr Forrest said. 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 to the parent company, in a new entity called The Pilbara Infrastructure (TPI). Fortescue Metals has previously announced its intentions of retaining only a maximum 40% interest in TPI which Mr Forrest said may be listed on international stock exchanges. "We continue to receive interest from parties seeking to invest in and develop a controlling interest in the rail and port facilities being pioneered in the Pilbara by Fortescue Metals", Mr Forrest said. Mr Forrest said CREC had clearly indicated an appetite to work with Australian companies on joint venture agreements covering the new rail network. CREC is a State-owned enterprise in China with work in hand of US$12 billion, prior to signing with Fortescue Metals. It is set to become a Fortune 500 Company next year and aims to become the top Asian construction company in three to five years. CREC has constructed 40,000 kilometres of rail networks throughout China, as well as 1,800 kilometres of rail bridges and a similar length of rail tunnels. Fortescue Metals earlier this month announced the discovery close to surface at its main Christmas Creek project in the Chichesters, of substantial tonnes of high quality microplaty haematite ore over only the initial iron ore deposits explored within that project area. The ore is in high demand by Chinese and Japanese steel mills as it requires little beneficiation before processing, and offers superior blast furnace performance. Fortescue Metals has the largest package of tenements (>16,000 sq kms) in the Pilbara province and has appointed the internationally recognised Worley Group Limited as Definitive Feasibility Study Managers for the project. Mr Forrest said today's agreement kept the Company's aspirations for first iron ore deliveries in the 2006 - 2007 financial year "on track". The Company has previously announced that its proposed Pilbara rail network would be open to access by other users. Media Contact: Andrew Forrest Kevin Skinner Fortescue Metals Group (FMG) Field Public Relations (08) 9266 0111 / 0402 097 191 (08) 8234 9555 / 0414 822 631 A dial-in conference call is scheduled for 10:00am (WST), 12:00 noon (EST) on Monday 23 August 2004. Details as follows; Phone No: 1800 063 720 Account No: 75104808 Guest PIN: 7643 26 ASIC draws attention to the statement that the "terms of the contract" include a "fixed price" and require CREC to take the "full risk" of constructing the Project, and points out that the framework agreement contains no such terms. The 5 November Letter 27 The announcement of 5 November 2004 was in the following terms: Design, Construct and Finance Agreements for Port, Rail and Processing Plant Fortescue Metals Group Ltd ("FMG") is pleased to announce that it has executed binding contracts with China Harbour Engineering Corporation ("China Harbour") and China Metallurgical Construction (Group) Corporation ("China Metallurgical") pursuant to a design, build and finance arrangement for the respective project component parts of FMG's Port Hedland ship loading and stockyard facility and FMG's Mine Processing Plant. The ceremony was officiated by Mr Wang Xiaoqi, the Director General of the Bureau of Planning and Development and of the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC). From Australia, Mr Barry Haase, Federal Member for Kalgoorlie, officiated with the formal support of the Premier of Western Australia, Dr Geoff Gallop, and the Minister for State Development for Western Australia, Mr Clive Brown. The ceremony was also attended by senior representatives from other major corporations already committed to the project including ThyssenKrupp, ABB, Barclay Mowlem, Leighton Contracting and BGC. These contracts follow a binding agreement signed with China Railway Engineering Corporation ("China Rail") in August 2004 whereby the largest project component part being the rail line from Port Hedland to the proposed mine site in the Chichester Ranges, is to be delivered under a design construct and finance structure substantially in the same form as those signed today. FMG has now established a broad platform for the delivery of the three major component parts of its AUD1.85 billion Pilbara Iron Ore and Infrastructure Project on terms and conditions that take full advantage of the expertise and balance sheet strengths of the contracting party. This has the effect of placing the majority project risk with the construction parties. Further, the payment terms for the 90% balance are structured on a staged basis effectively providing a finance facility for this substantial portion of the total project cost. FMG in return for a bank guarantee from the contracting parties will fund the initial 10% of the project value. This balance is being quickly filled by customer pre payments and we are actively pursuing further joint ventures. The Chinese Government owns the three companies that have committed to design, construct and finance the Fortescue project. They are all the largest and leading participants in their respective areas of operation within China. All three enterprises have international experience and their preferred operating methodology is to involve local expertise particularly in regard to design and construction. As previously announced, China Rail signed an agreement with Barclay Mowlem pursuant to the rail project which will provide them with significant local knowledge given Barclay Mowlem were a major contractor under the Alice Springs to Darwin rail line. Currently there are a number of Australian companies in China developing working relationships with China Harbour and China Metallurgical to bring similar levels of expertise to their particular areas of interest. FMG believes that the high level of engagement being actively sought by the various Chinese groups covering both product purchase agreements and project construction relationships is clear evidence of the desire held by many Chinese corporations to see FMG firmly established as an important supplier of iron ore into the future. For further information we refer to the media release on the Company's website at www.fmgl.com.au. 28 The corresponding media release stated: CHINA TO FUND NEW A$1.85 BILLION AUSTRALIAN IRON ORE AND INFRASTRUCTURE PROJECT Australia's newest iron ore project is to be financed and built by three of the largest state owned companies in China in a near A$2.0 billion fillip for Australia's resources sector. Binding contracts announced and signed this afternoon in Beijing commit Chinese financing and construction support for the A$1.85 billion iron ore and infrastructure project proposed by Fortescue Metals Group Limited in Western Australia's Pilbara. The new agreements with China Harbour Engineering Group (China Harbour) & China Metallurgical Construction (Group) Corporation (China Metallurgical) are the latest breakthrough for Fortescue Metals and Australia in opening up a major new iron ore supply source and corridor to burgeoning overseas markets by 2007. Also in Beijing today as signatory partners to the construction commitments were some of the largest multi-national and Australian engineering, metallurgical, project management and construction firms, and equipment suppliers which will participate widely in the project's development. The contracts announced today follow the binding agreement with China Railway Engineering Corporation (China Rail) announced by Fortescue Metals in August this year. The three agreements now form a total project construction and finance solution as follows: - Mine: China Metallurgical will provide a financing, design, and construction package for the mine and beneficiation plant at Christmas Creek - Railway: China Rail has committed to the financing, design, and construction of the heavy haul open-access rail line and associated rolling stock, between the Chichester Ranges and Port Hedland - Port: China Harbour will provide the financing, design and construction for the large-scale works covering the dredging, train unloading, or [sic] stacking, blending and ship loading facilities at Fortescue Metals' selected export outlet at Anderson Point in Port Hedland. - Other Significant Multinational and Australian involvement: Corporates already committed to the project include ThyssenKrupp, ABB, Barclay Mowlem, Leighton Contracting, and BGC. The ceremony was officiated by Mr Wang Xiaoqi, the Director General of the Bureau of Planning and Development of the State-owned Assets Supervision and Administration Commission of the State of the Council (SASAC). From Australia, Mr Barry Haase, Federal Member for Kalgoorlie, officiated with the formal support of the Premier of Western Australia, Dr Geoff Gallop, and the Minister for State Development for Western Australia, Mr Clive Brown. "These commitments by Chinese interests now cover the financing and construction risk for the total project," Fortescue Metals' Chief Executive Officer, Mr Andrew Forrest, said today. "Our approach has been to ensure that construction risk is carried by the contractors and that project payment by Fortescue Metals only follows Practical Completion," Mr Forrest said. Since June this year, Fortescue Metals has raised A$14.5 million in new share capital through two separate share placements and signed long term binding sales agreements that contain prepayment commitments of A$66 million payable either at financial close or during the term to first product shipment. "The three contracts will now limit Fortescue's initial financing requirement to less than 10% of the estimated $1.85 billion total project cost with the balance covered largely by prepayment commitments. These commitments from customers provide cost effective finance that does not have an equity dilution effect for existing shareholders in Fortescue Metals. Despite this we are not ruling out further joint ventures with Chinese and other multi-national corporations" Mr Forrest said. "The construction funding significantly enhances the economic value of the project by de-risking the development phase - often an issue with greenfields project financing," he said. "The involvement of China in the financial packaging and construction schedules for all three elements of this massive undertaking, is the birth of a new Sino-Australian partnership that will be a major boost for the Australian and Chinese economy. Significantly it has Fortescue on target for 2007 start up as the new Australian source of long-term quality iron ore supply to mills in the Asian region. As announced in recent weeks, FMG's first batch of long term binding sales contracts provides for a total delivery commitment of 8 million tonnes of iron ore per annum of an estimated initial production level of 45 million tonnes per annum. Mr Forrest said that it was significant that the "contracts were signed soon after Fortescue Metals announced its interim resources exploration results from Christmas Creek. The qualitative analysis of the materials sent a clear signal as to the product type and grade being targeted for production in the 2006/07 financial year - and has been increasingly acknowledged by international steel mills." The 8 November Letter 29 FMG's letter of 8 November was written in response to a request by Mr Walsh of the ASX that FMG provide the ASX with the material terms of the framework agreements. ASIC relies upon the letter of 8 November as a further mis-statement of the effect of the framework agreements. ASIC also relied on this letter as evidence of an attempt by FMG to avoid providing the ASX with the actual terms of the framework agreements. 30 The letter released to ASX on 8 November was in the following terms: Additional Information on China Harbour and China Rail Agreements Fortescue Metals Group Ltd ("FMG") is pleased to announce further developments to the agreements signed with China Harbour Engineering Corporation ("China Harbour") and Metallurgical Group of China ("China Metallurgical") pursuant to the design, build and finance arrangement for the respective project component parts of FMG's Port Hedland ship loading and stockyard facility and FMG's mine processing plant. As mentioned in Friday's ASX release, there were a number of Australian companies present at the signing ceremony that were in varying stages of forging closer ties with the Chinese companies. FMG can now advise that two of those Australian companies have also recently signed separate agreements with China Harbour and China Metallurgical. ThyssenKrupp Engineering (Australia) Pty Ltd ("ThyssenKrupp Engineering") has signed a Memorandum of Understanding with China Harbour and China Metallurgical for the development of an ongoing working relationship with each of these companies for the FMG project. BGC Contracting Pty Ltd ("BGC") has also signed a similar Memorandum of Understanding ("MOU") with China Metallurgical. The MOU's signed by ThyssenKrupp Engineering and BGC follow similar lines to that entered into between Barclay Mowlem and China Rail in that it creates a strategic relationship with a local operator that has the requisite experience and knowledge of Australian conditions. BGC is a well known and highly regarded Western Australian private company. Among a range of diverse construction activities, BGC has been involved in a number of large scale resource and mining projects in northern Western Australia and has the requisite skills for a central project role. ThyssenKrupp Engineering's direct parent company ThyssenKrupp Foerdertechnik is the world market leader in the fields of mining, materials handling and processing equipment with ten business units operating across all five continents. The ultimate group parent ThyssenKrupp AG is a global operation and recognised as a market leader in steel, capital goods and services. The involvement of well credentialed Australian operators with each of China Rail, China Harbour and China Metallurgical collectively provides further momentum to FMG's inexorable progress toward becoming the "new force in iron ore" in Australia. As reported on Friday, FMG now has the three important component parts of its Pilbara Iron Ore Infrastructure Project (ie. rail, port and processing plant) covered within three separate agreements. The aggregate capital cost of the assets covered under the respective agreements is estimated at A$1.7 billion. All three Chinese companies will be working with FMG and the Worley Group within the Definitive Feasibility Study process to establish a firm price which will then be incorporated into a fixed price contract with each party. As contemplated under the respective agreements entered into to date, the first stage of work covering design and engineering will allow for the confirmation of a mutually agreed set price for embodiment into formal construction contracts. As announced on Friday, the payment structure set within all three agreements requires an initial 10% of the contract price to be paid prior to commencement of work. When paid, the contractor will issue FMG with a corresponding bank guarantee for the same amount which will be released when 10% of the work is completed. The balance of the contract price is payable following practical completion under each agreement. FMG believes this to be one of the most important features of the arrangement as it places the majority risk with the construction entity. As further advised on Friday the staged payment terms post practical completion then allow FMG up to three years before final payment is due which creates opportunities to refinance these obligations under longer term arrangements. FMG is in discussion with a number of capital market groups regarding such refinance opportunities. The benefit of the abovementioned staged terms and the ability to show financiers an operating history of several years is considered a further important advantage accruing under the China agreements. Security under the respective agreements has been determined as being a charge or similar style interest pledged by FMG to the contractor over an amount of JORC defined iron ore "in ground" resource for a dollar amount to cover the value of works under contract. In summary the project achievements of the last few days have been extensive and provide a continuing platform for these component parts of the project to be advanced in parallel to ensure the Detailed Feasibility Study process is finalised within the set timeframe. Section 1041H of the Act 31 Section 1041H of the Act provides relevantly: 1041H Misleading or deceptive conduct (civil liability only) (1) A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive. (2) The reference in subsection (1) to engaging in conduct in relation to a financial product includes (but is not limited to) any of the following: (a) dealing in a financial product; (b) without limiting paragraph (a): (i) issuing a financial product; (ii) publishing a notice in relation to a financial product; … (x) carrying on negotiations, or making arrangments, or doing any other act, preparatory to, or in any way related to, an activity covered by any of subparagraphs (i) to (ix). 32 ASIC's case under s 1041H rests on the 16 public statements referred to in [6] and [10] above. ASIC alleged that these statements were misleading in relation to the CREC, CHEC, and CMCC framework agreements. It is sufficient for present purposes of this appeal to focus principally on the letters and media releases referred to in [4] above. 33 ASIC also relied upon s 52 of the TPA to cover the possibility that it might be held that a particular statement was not made "in relation to a financial product or a financial service." Section 674 of the Act 34 Section 674 of the Act provides as follows: 674 Continuous disclosure—listed disclosing entity bound by a disclosure requirement in market listing rules Obligation to disclose in accordance with listing rules (1) Subsection (2) applies to a listed disclosing entity if provisions of the listing rules of a listing market in relation to that entity require the entity to notify the market operator of information about specified events or matters as they arise for the purpose of the operator making that information available to participants in the market. (2) If: (a) this subsection applies to a listed disclosing entity; and (b) the entity has information that those provisions require the entity to notify to the market operator; and (c) that information: (i) is not generally available; and (ii) is information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of ED securities of the entity; the entity must notify the market operator of that information in accordance with those provisions. (2A) A person who is involved in a listed disclosing entity's contravention of subsection (2) contravenes this subsection. (2B) A person does not contravene subsection (2A) if the person proves that they: (a) took all steps (if any) that were reasonable in the circumstances to ensure that the listed disclosing entity complied with its obligations under subsection (2); and (b) after doing so, believed on reasonable grounds that the listed disclosing entity was complying with its obligations under that subsection. 35 Section 676 of the Act provides: 676 Sections 674 and 675—when information is generally available (1) This section has effect for the purposes of sections 674 and 675. (2) Information is generally available if: (a) it consists of readily observable matter; or (b) without limiting the generality of paragraph (a), both of the following subparagraphs apply: (i) it has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of a kind whose price or value might be affected by the information; and (ii) since it was so made known, a reasonable period for it to be disseminated among such persons has elapsed. (3) Information is also generally available if it consists of deductions, conclusions or inferences made or drawn from either or both of the following: (a) information referred to in paragraph (2)(a); (b) information made known as mentioned in subparagraph (2)(b)(i). 36 Section 677 of the Act provides: 677 Sections 674 and 675—material effect on price or value For the purposes of sections 674 and 675, a reasonable person would be taken to expect information to have a material effect on the price or value of ED securities of a disclosing entity if the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the ED securities. 37 The ASX is, by virtue of reg 1.0.02A of the Corporations Regulations 2001, a "prescribed financial market". At all material times, FMG's shares have been listed for quotation on the ASX. Thus, the ASX is a "listing market" and FMG's shares are "ED securities", i.e. enhanced disclosure securities, for the purposes of s 111AE of the Act. By virtue of s 111AM of the Act, enhanced disclosure securities of FMG are "quoted ED securities", and by virtue of s 111AL(1), FMG is a "listed disclosing entity" for the purposes of s 674 of the Act. 38 As appears from s 674(1), s 674(2) of the Act operates by reference to the requirements of the Listing Rules of the ASX. In that regard, Listing Rule 3.1 relevantly provides: 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. 39 For the purposes of Listing Rule 3.1, Listing Rule 19.12 provides an extended meaning of the word "aware" and relevantly provides as follows: [A]n entity becomes aware of information if a director or executive officer…has, or ought reasonably to have, come into possession of the information in the course of the performance of their duties as a director or executive officer of that entity. 40 ASIC's case against FMG under s 674 of the Act is that because the directors of FMG, including Forrest, were in possession of each of the framework agreements, they were in possession of information, being the terms of those agreements, or ought reasonably have come into possession of information being the effect of those agreements. That information, i.e., either the terms of the framework agreements or their effect, was information which a reasonable person would expect to have a material effect on the price or value of FMG's shares because it would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of shares in FMG. 41 Shortly put, ASIC's contentions under this rubric are: a statement of the terms of each of the framework agreements, or of their legal effect was likely to influence investors in deciding whether to acquire or dispose of shares in FMG; alternatively, once investors had been told that FMG had made binding agreements with the Chinese Contractors to build, finance and transfer the infrastructure, information that these statements were in error was likely to influence investors in deciding whether to acquire or dispose of shares in FMG. 42 In support of ASIC's case that the information that FMG had entered into arrangements, whether preliminary or final, in relation to the building and transfer of the infrastructure of the Project would have been likely to influence investors, it relied upon expert evidence from Mr Andrew Sisson, an experienced share portfolio manager, Mr Reginald Keene, an experienced stockbroker and Dr Iain Watson, an expert in business statistics and capital markets research. In response, FMG relied upon the evidence of Mr Houston in support of the argument that, given that the market knew that the prospects for the Project were speculative, and that the viability of the Project depended on a Definitive Feasibility Study (the DFS), announcements by FMG that it had entered into agreements to agree upon build and transfer contracts for the infrastructure would not have been likely to influence investors whether to acquire or dispose of FMG shares. 43 ASIC also argued that FMG and Forrest were aware, by 5 November 2004 at the latest, that approval from an agency of the Chinese government known as the national Development and Reform Commission (NDRC) would be required if the Chinese Contractors were actually to finance and build the projects, and that a condition of this approval would be that a Chinese investor take an interest in the Project equity. This was said to necessitate disclosure as an aspect of the non-binding nature of the agreements. It was also relied upon as a further particular of the case under s 1041H of the Act. FMG and Forrest argue that ASIC had not pleaded this case, but it was litigated, findings were made in relation to it, and no attack on those findings has been made by FMG and Forrest. 44 It is relevant to ASIC's case against Forrest to note that s 79 of the Act provides: 79 Involvement in contraventions A person is involved in a contravention if, and only if, the person: (a) has aided, abetted, counselled or procured the contravention; or (b) has induced, whether by threats or promises or otherwise, the contravention; or (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention. Section 180 of the Act 45 Section 180 of the Act provides as follows: 180 Care and diligence—civil obligation only Care and diligence—directors and other officers (1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they: (a) were a director or officer of a corporation in the corporation's circumstances; and (b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer. Business judgment rule (2) A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they: (a) make the judgment in good faith for a proper purpose; and (b) do not have a material personal interest in the subject matter of the judgment; and (c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and (d) rationally believe that the judgment is in the best interests of the corporation. The director's or officer's belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold. (3) In this section: business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation. 46 ASIC contends that Forrest contravened s 180(1) of the Act by allowing FMG to contravene s 674 of the Act thereby exposing it to pecuniary penalties. ASIC relies upon s 674(2) of the Act and argues that Forrest is not entitled to rely upon s 674(2B) of the Act by way of defence because there is no evidence that Forrest sought or obtained or acted upon legal advice before allowing FMG to make the public statements in question. ASIC also argues that Forrest was not entitled to rely on the business judgment rule referred to in s 180(2) of the Act because that rule does not authorise conduct which involves the contravention of a specific provision of the Act, such as s 674(2), especially where the Act provides a specific ground of defence in relation to that provision. FACTUAL BACKGROUND 47 Some facts relating to the Project, which were in the public domain prior to the August 2004 announcements, were outlined by the trial judge in Part 5 of his reasons. These publicly known facts included the following: 1. On 5 April 2004, stockbroking firm and market analyst, Paterons Securities Ltd stated that the conditions necessary for financial close of the Project were "the completion of a feasibility study, proof of financially robust project economics, completion of environmental, Aboriginal and heritage permitting and approval issues, and both equity and debt fundraising commitments". It described FMG shares as a "speculative buy" (at [184]). 2. In July 2004 Worley Pty Ltd ("Worley") was appointed by FMG as the manager of the preparation of a DFS for the Project. This appointment was accompanied by several media reports, including (at [186]-[190]): An AFR report on 9 July 2004 which stated, in part, that the Worley Group had been appointed to "manage a definitive feasibility study. Fortescue hopes to join the global miners…as a supplier of iron ore…pending the results of the study, due by the first quarter of 2005." A report by Macquarie Research Equities dated 9 July 2004, which stated, in part, "The project involves a $450 million mine, $930 million railway and $470 million port and aims to be producing by FY 2007. The feasibility study is the first step in the process towards obtaining finance for the project." A Reuters report dated 23 August 2004, which stated "The railway depends on a feasibility study into the iron ore project, which is scheduled to be completed early next year." 3. On 9 August 2004, FMG announced that the DFS would cost $34 million. FMG had invested $12 million, and on 13 October it was announced that JF Capital had invested $7 million. This meant that an additional $15 million was required in order to complete the DFS. The trial judge found that "The news that FMG needed to obtain funds to carry the DFS through to completion was widely reported in the media" (at [198]). 4. As of August 2004, FMG had not obtained any of the regulatory or statutory approvals necessary for the construction of the Project infrastructure (at [199]). 48 The market was aware of the critical importance of the DFS to the prospects of the Project. In this regard, the trial judge summarised Sisson's evidence as follows (at [185], [191]-[192], and [201]): [T]he share market did not value FMG on the assumption that its plans to become a producer of iron ore were likely to come to fruition. … According to Sisson…the market understood in August that the DFS was expected to define the scope, design, costs and economic viability of the works. Heyting [formerly the Project Manager of Infrastructure at FMG who was called as a witness by ASIC] said that among other things, the DFS was intended to define the scope of the works, define scheduling requirements for the building of the component parts of the project, delineate a resource base to render the project commercially viable, and consider issues such as native title and environmental studies with a view to determining the cost and viability of the Project. He added that the aim of the DFS was to enable finance for the Project to be raised. He conceded that these matters were well-known in the market. Accordingly a successful DFS was of the utmost importance, and would have been so understood by the market. Sisson acknowledged that without a DFS concluding that there was a viable project no bank would lend to the Project, and FMG's directors would consider that they could not proceed. … General market opinion of FMG in August 2004 reflected an air of scepticism. (Emphasis added). 49 By early November 2004, the publicly known facts had changed slightly. They then included the following (at [203]): 1. FMG had defined approximately 1.13bt of JORC compliant reserves, compared to FMG's target of 2bt. The 1.13bt amount was made up of 390.8 mt at Mt Nicholas, announced on 31 March 2004, and 744 mt announced on 30 September 2004. JORC is an acronym derived from the title of the Australasian Joint Ore Reserves Committee. 2. On 24 August 2004, AAP reported that FMG was in the process of finalising a State agreement with the Western Australian government, however it had not yet been approved. This fact was also reported in the Australian Financial Review on 1 October, FMG's Quarterly Report on 30 September, and by Patersons' market report of 30 September 2004. 3. FMG had entered three firm sales contracts for a total of 8mt of iron ore per annum. FMG's target was 45 mt per annum. These agreements were announced on 6, 13, and 21 October 2004, and received wide coverage in the media (at [203]). 50 The trial judge set out in some detail, (at [134]-[181]), aspects of the factual context in which the three agreements with the Chinese Contractors were signed and relevant conduct on the part of the Chinese Contractors after the framework agreements had been signed. His Honour's principal findings in this regard were: 5. "According to Heyting, it was clear from the April 2004 meetings that CREC was very anxious to 'do this project' with a view to enhancing market perception of the company by building a railway in a first world country such as Australia" (at [138]). 6. The signing ceremony for the CREC agreement was "a high level, serious, and, by Chinese custom, solemn occasion. Kirchlechner [Head of Marketing for FMG] accepted that the parties were entering into a serious agreement and were expecting that each party would fulfil its obligations under the agreement" (at [149]). 7. In relation to the CHEC and CMCC agreements, the "signing of these two framework agreements on 5 November 2004 was publicised widely in China as well as Australia...At no point before 24 March 2005, despite this widespread coverage in Australia and China, was there any correction made to such reporting by any of the Chinese Contractors" (at [179]-[180). 8. CREC realised "the importance of the DFS and its central position in a relationship with FMG" (at [145]). 51 These publicly known facts bore upon the likelihood that investors would have been influenced to acquire or dispose of FMG's shares by the disclosures which, on ASIC's case, ought to have been made. 52 It should be noted here that the trial judge's finding that the scope and design of the Project was dependent on the DFS was consistent with FMG's case at trial. It is, however, inconsistent with an important argument advanced by FMG in this Court, namely that the parties entered into the framework agreements on the agreed basis that the scope and design of the Project was described, not in the DFS, but in an earlier document, the PFS. I will return to this point in due course. For present purposes, it is sufficient to note that the announcements in question were couched in terms which were apt to persuade the market that the making of the framework agreements was a significant step in resolving the uncertainties which had previously attended the Project. THE CONCLUSIONS OF THE TRIAL JUDGE Section 1041H 53 In relation to ASIC's case under s 1041H of the Act, the trial judge characterised the statements by FMG as "necessarily underpinned by an opinion" as to the legal effect of the framework agreements. This was the first step in his Honour's process of reasoning. Thus his Honour said (at [684]): It might be thought that the disclosures, to the effect that FMG had executed binding build and transfer agreements with each of the Chinese Contractors, ought be characterised as statements of fact rather than opinion. Certainly, they were assertive in nature and were not expressly said to be expressions of opinion. However, I consider that they constitute mixed fact and law. 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. However the disclosures are characterised, a question as to the reasonableness of the underlying opinion and, in this case, whether or not it was honestly held, arises. 54 The second step in his Honour's reasoning was to conclude that this opinion was honestly and reasonably held by FMG and Forrest. His Honour said (at [59]): I have found that FMG did not contravene s 1041H of the Act. The disclosures complained of by ASIC did not constitute misleading or deceptive conduct. FMG's disclosures concerning the binding nature of the framework agreements were assertions, necessarily underpinned by an opinion that the agreements were such. In my view, such an opinion was reasonably based and honestly held by FMG and Forrest. The expression, in effect, of that opinion, by its assertions as to the effect of the framework agreements misrepresented nothing. That there was scope for alternative opinions to be held as to the legal effect of the framework agreements does not mean that FMG engaged in misleading or deceptive conduct. 55 His Honour approached the interpretation of s 1041H by reference to authorities relevant to the interpretation of s 52 of the TPA (at [660]). After an exhaustive examination of the evidence, his Honour concluded that "FMG did not contravene s 1041H by making any of the 16 disclosures concerning the CREC, CHEC and CMCC Framework Agreements and the Project generally" (at [882]). 56 ASIC presented an alternative case under s 1041H of the Act to the effect that FMG knew, or ought reasonably to have known, that the NDRC would be unlikely to approve CREC, CHEC and CMCC entering into binding agreements to build the infrastructure unless a Chinese entity obtained an equity stake in the project. His Honour summarised this case as follows (at [60]): The gravamen of ASIC'S additional or alternative case under s 1041H is that FMG's disclosures as to the meaning and legal effect of the framework agreements were misleading or deceptive or likely to be so in circumstances where FMG did not have a genuine and/or reasonable basis for making the statements and ought reasonably to have known that the Chinese Contractors would not or probably would not carry out the works necessary for the Project without the approval of NDRC. ASIC then says that the NDRC would, or probably would, withhold its approval for CREC, CHEC or CMCC to enter contracts binding them to build, finance and transfer the infrastructure necessary for the Project unless a Chinese entity obtained an equity interest in the Project. 57 As to this alternative case, the trial judge found that FMG honestly and reasonably believed that the NDRC had approved the making of the framework agreements and that, to the extent that Chinese equity in the Project was likely to be a condition of performance by the Chinese Contractors, agreement upon the equity issue was a mere formality. The trial judge's summary of the evidence and findings of fact in relation to this aspect of the case is at [61]-[67]. His Honour said: I find that FMG and Forrest knew that financial investment by the Chinese Contractors in building the infrastructure required NDRC approval and that Mr He of the NDRC in turn tied that approval to the requirement that a Chinese entity, likely ultimately to have been CMCC, obtain a minority equity in, it seems, an FMG mine(s). However, I find that the NDRC…had approved the Chinese Contractors entering into the framework agreements. I have concluded that FMG's disclosures were not misleading or deceptive. The additional allegations, concerning NDRC approval and equity do not alter my conclusion. In any event, although I have found that Chinese commercial reality dictated NDRC approval as a prerequisite to the provision of finance, this does not mean that the need for approval operated at a contractual level. Neither NDRC approval nor the provision of equity was a condition of the framework agreements, nor was it contained in the drafts of later documents known as Advanced Framework Agreement although they could have been. ASIC's primary claim is that the disclosures made as to the meaning and legal effect of the framework agreements were misleading or deceptive. The need for approval tied to equity does not, in my opinion, at least in the way ASIC pleaded its case, impact upon that question. I find that, in respect of the CREC Framework Agreement, the trigger for NDRC approval for financial investment, being the provision of a minority equity interest to a Chinese entity, whether by shareholding or joint venture, was almost a formality. FMG had, for a long time prior to execution of the CREC Framework Agreement, been pursuing such Chinese investment, and more, and the Chinese side was anxious to obtain it. The NDRC had given every indication that it fully supported the Project and was keen for Chinese involvement. FMG had over a long period made it clear it was prepared to give a Chinese contractor or steel mill a minority equity stake. Mr He, of the NDRC, in August 2004 also made it clear that this was all that was being sought. It was, as at 5 November 2004, when the last two framework agreements had been executed and when disclosures were made on 9 November 2004, then only a matter of negotiating the actual amount of the equity interest and its price. There was not even the hint of a suggestion that this could not or would not be achieved. Indeed the position, as at 9 November was to the contrary. In other words, FMG and Forrest, quite reasonably, considered that the matter of NDRC approval for financial investment and the allied question of the provision of equity was no barrier to the performance of the executed framework agreements. ASIC's case concerned statements about the legal effect of the framework agreements, not that there was a practical barrier to their performance. The market was already aware that significant aspects of the framework agreements still had to be agreed upon through the DFS process and that, in any event, each of the framework agreements was ultimately dependent on a bankable DFS at the earliest in March 2005. Approval by the NDRC, linked as it was to the provision of equity, was merely another contingency. This does not go to the issue of their legal effect. The grant, in due course, of NDRC approval was regarded, reasonably, by FMG, as a formality. That, from November 2004, this was complicated by the marked and unwarranted change of position taken by Mr He of the NDRC merely gave rise to negotiations as, indeed, Mr He intended. FMG and Forrest were entitled, in my view, to negotiate with the Chinese Contractors through CMCC and the NDRC to resolve the impasse created by Mr He, contrary as it was to the consensus reached in August 2004 for minority equity, without having to inform the ASX. Indeed, by September 2005, FMG had succeeded in reducing the demands for majority equity down to a 50/50 joint venture although that process took many months However the DFS completion date had been extended beyond March 2005 and was only partially completed in September 2005 and not fully completed till April the following year. There was no question, as the market well knew, that any of the framework agreements would proceed until there was a completed bankable DFS. 58 For reasons which will become apparent, it is not necessary to decide whether the trial judge was correct in rejecting ASIC's alternative case under s 1041H of the Act. Section 674 59 In rejecting ASIC's case under s 674 of the Act, the trial judge elaborated upon his view that FMG reasonably regarded the framework agreements as legally binding agreements for the construction of the infrastructure for the Project (at [50]-[51]): Significantly too, CREC approved the terms of the 23 August Media Release before FMG made the notifications to the ASX on 23 August 2004. The release described the CREC Framework Agreement as a "binding agreement to build and finance the railway component of Fortescue Metals Group Ltd's $1.85 billion Pilbara iron ore project". In the release Mr Qin Jiaming (Qin), the President of CREC, is quoted as saying that the contract presented an excellent opportunity for CREC to develop internationally and that CREC was fully confident about its capacity to build the rail project. It was described by him as a 'marriage' immediately following the high level ceremony when the parties signed the Joint Statement which rendered the agreement binding. I find that the terms of the 5 November Media Release provided to CHEC and CMCC was likewise approved, at least not disavowed, by them before disclosure to the ASX by FMG. 60 His Honour found that the AFR Article was the product of self-interested manipulation by the Chinese parties. In this regard, his Honour said (at [52]-[53]): The AFR Article, which reported that, according to the Chinese parties, the framework agreements did not impose on them legally binding obligations, was engineered by Mr He of the NDRC as a blunt commercial tactic in an attempt to wrest majority control of the Project from FMG. This was quite contrary to the clear understanding which existed prior to the execution of the framework agreements that FMG would never agree to this but that a minority equity position would be given to a Chinese entity. I find FMG was entitled to regard Mr He's unwarranted actions, which resulted in publication of the AFR Article, as a plank in his attempt to renegotiate the equity question. FMG was ultimately successful in reducing the demands from a majority to a minority equity position. The AFR Article did not reflect the actual views of the Chinese Contractors who, on the evidence, prior to and after its publication, regarded themselves bound by the framework agreements to build the infrastructure. 61 The trial judge summarised his conclusions in relation to FMG's alleged breaches of s 674 of the Act at [41]-[56] of his reasons. The first step in his Honour's reasoning under this heading was once again to characterise FMG's statements to the ASX as conveying only statements of opinion. The second step was to conclude that FMG's directors did not have the "Information" which ASIC argued should have been disclosed to the ASX because they did not hold the same opinion as ASIC as to the effect of the framework agreements. In terms of the Listing Rules, his Honour did not accept that framework agreements were known by, or ought reasonably to have been known by, FMG's directors, to be unenforceable as contracts to build and transfer the infrastructure for the Project. His Honour said (at [41): There is no evidence that FMG by any of its directors or officers, including Forrest, ever held the opinions postulated by ASIC and which underpin its case as to what FMG ought to have disclosed as to the meaning and legal effect of the framework agreements. I find that the opinions contended for by ASIC do not self-evidently or obviously emerge upon merely reading the terms of the framework agreements. 62 His Honour elaborated on these findings at [465]-[468]: ASIC has failed to establish that FMG or Forrest, as a director and executive officer of FMG, held or ought reasonably to have held, the opinions which underpin the assertions as to the meaning and legal effect of the framework agreements reflected in the Informations. It follows that I am satisfied, applying the Listing Rule 19.12 definition of 'aware', that FMG did not become aware of the Informations. ASIC's case under s 674(2) fails for this reason alone. FMG was not aware of the Informations, and accordingly was under no obligation to disclose it to the ASX. Applying s 674(2)(b), FMG did not have information at the relevant times that the Listing Rules required it to notify to the market operator, and FMG did not contravene s 674(2) by failing to notify the asserted information to the ASX. Its obligations under s 674(2) were satisfied by making the notifications in August 2004 and November 2004 which accorded with its opinion, reasonably and honestly held, as to the meaning and legal effect of the framework agreements. As a consequence of my finding that FMG did not contravene s 674(2), then Forrest could not have been a person who was involved in a contravention of that subsection pursuant to sub-s (2A). It is therefore unnecessary for me to deal with his submission that he did not contravene sub-s (2A) because, for the purposes of sub-s (2B), at all material times, he believed, on reasonable grounds, and took all necessary steps to ensure, that FMG was complying with its obligations under s 674(2) of the Act. 63 It may be noted here that the trial judge focused exclusively on the disclosure of the effect of the framework agreements rather than their actual terms. ASIC's case of breach of s 674 included FMG's failure to disclose the terms of the framework agreements as well as their effect. 64 ASIC had also contended that FMG and Forrest did not have an honest and reasonable basis for the opinion or judgment reflected in the information notified to the ASX. Insofar as this aspect of ASIC's case involved an assertion of deliberate dishonesty by FMG's directors, the trial judge's attention was inevitably focussed upon the mental state of Forrest and his fellow directors, rather than the objective effect of their conduct. Not surprisingly, FMG and Forrest were content to fight the case on this ground. In rejecting ASIC's contention, the trial judge said (at [42]-[43]): ASIC contends that FMG through Forrest had no genuine and or reasonable basis for making its claims that the framework agreements were binding build and transfer agreements. It has accused FMG, its board and in particular Forrest, of deliberate dishonesty in making those claims knowing that they were false, unqualified and emphatic. It says that there is no evidence that FMG obtained any legal advice concerning the agreements, and that if it had obtained competent legal advice, it would have been aware of the legal effect of the framework agreements asserted by ASIC and forming part of the Informations. It says that, in those circumstances, the misleading disclosures could not have been made by a responsible company or board of directors. This transpired to be a surprising submission for ASIC to make. 65 As to this last comment, the trial judge explained (at [44]): In fact FMG did have the benefit of competent professional legal oversight and advice in relation to its agreements, including the framework agreements. Mr Peter Huston and his assistant Hsin-Luen Tan of Troika Legal Ltd had, prior to October 2004, been available to advise FMG. Huston was described by ASIC in its pleading as a qualified, experienced and practising commercial solicitor. From early October 2004, Huston and Tan joined FMG as employees. It is apparent that one of Huston's principal roles, at least from that time, was to oversee and ensure the legal enforceability, or as Forrest sometimes said, the "bankability" of FMG's agreements. This is evident from an email dated 3 October 2004 sent by Forrest to FMG's senior executives and Graeme Rowley, another of FMG's directors. 66 The trial judge summarised the evidence on which his findings were based (at [46]-[48]): Huston helped prepare the draft as well as the final 8 November Letter concerning the three framework agreements provided by FMG to the ASX that day. He attended a meeting with Mr Tony Walsh, Assistant Manager Issuers of the ASX, on 8 November 2004 relevantly to discuss this draft for the purpose of providing further information to the ASX as to the terms of the framework agreements. I have concluded that, for this purpose, Huston would have considered the terms of the related 5 November Letter and the three framework agreements referred to in that letter. He did not advise the FMG Board or Forrest that these agreements were not legally binding or that the 5 November Letter was to that extent incorrect or not reasonably based. Given his role in FMG, had he formed that view, I find that he should have and would have informed the board. That he did not, entitled the board and Forrest to continue to regard the disclosures concerning the legal effect of the framework agreements as correct, or at least that they were reasonably based. That this was so is fortified by evidence of actual advice given by Huston to the FMG board that the framework agreements were legally binding as disclosed. The FMG board minutes of its 22 January 2005 meeting, attended by Huston, record his advice to the board that the CMCC Framework Agreement was binding. So too did an email sent by him on 30 March 2005 to Forrest, Christopher Catlow, David Liu, Rowley, Alan Watling and other FMG executives concerning the AFR Article in which he repeated this advice, relying in particular upon the Anaconda decision. The 30 March 2005 email was not disclosed in ASIC's pleading. While the minutes of the 22 January board meeting were set out as a particular of two allegations concerning FMG's and Forrest's knowledge of the Chinese Contractors' attitude towards the framework agreements and of the legal effect of the agreements, ASIC did not particularise the material passage in the minutes where Huston's legal advice to the board was set out, nor did it refer to this passage in its opening or closing submissions. This is so, despite the fact that, in relation to ASIC's s 674 case, it asserted, amongst other things, that FMG ought to have been aware of the legal effect of the framework agreements asserted by ASIC by first obtaining competent legal advice. Huston was a very experienced and competent commercial solicitor. 67 I pause to note here that the reference in this passage to the Anaconda decision was a reference to litigation in which Forrest had been involved at an earlier time and which was resolved in his favour. That case involved an informal contract which contemplated the execution of a later contract. It was said to support the reasonableness of Forrest's view of the effect of the framework agreements. Forrest did not give evidence; there was no evidence that Forrest had the Anaconda decision in mind when he permitted FMG to make the announcements in question. 68 I note also that there was no evidence that Mr Huston, a lawyer engaged by FMG after the August announcements, considered the terms of the 5 November letter or the three framework agreements referred to in the letter before the impugned announcements were made. Further, as ASIC points out on its appeal, there was no evidence that Mr Huston did not, in fact, advise the Board or Forrest that the 5 November letter was incorrect or not legally accurate. Neither Forrest nor any of the other directors of FMG gave evidence. There was no evidence that, at the time of FMG's statements to the ASX, Forrest regarded the framework agreements as analogous to the agreement at issue in Anaconda. 69 The trial judge criticised ASIC in relation to its failure to alert him to the Board minutes of 22 January 2005 and the email of 30 March in the course of presenting its case. His Honour said (at [49]): I was not referred to these documents during the trial until the closing address by Forrest's senior counsel, Mr Myers QC. Their content, 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 reject 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 to ensure the legal enforceability of FMG's agreements as well as his later positive advice to the effect that they were such. It was a view consistent with Forrest's knowledge of the Anaconda case. It finds arguable support in other authority. 70 In this Court, Counsel for ASIC argued that the trial judge's criticism of ASIC was unjustified, noting that the minutes of the Board meeting of 22 January 2005 were the subject of a claim of privilege by FMG which was maintained until after ASIC had made its final address at trial. More importantly, for the purposes of this appeal, 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: there was no evidence which would have supported that inference. 71 The trial judge concluded that FMG and Forrest honestly and reasonably believed that the disclosures were accurate and that, accordingly, no contravention of s 674 of the Act had occurred. Significantly, having focussed on the mental elements involved in one aspect of ASIC's case, his Honour did not reach a concluded view as to the true effect of the framework agreements. His Honour said (at [54]-[56]): I have had no hesitation in finding that FMG, its board and Forrest held their opinion as to the meaning and legal effect of the framework agreements honestly and reasonably. FMG submits that the framework agreements actually do have the legal effect claimed in its disclosures. It is unnecessary for me to reach a concluded view as to that. I have concluded that FMG's and Forrest's opinion, which underpinned the disclosures, in each case was honestly and reasonably held at the times of the disclosures and thereafter. This is sufficient for present purposes. Accordingly, they were not in possession of, nor ought reasonably have been in possession of, the Informations, which include ASIC's opinion as to the meaning and legal effect of the respective framework agreements. ASIC's case under s 674(2) against FMG fails for this reason alone. As a consequence of my finding that FMG did not contravene s 674(2), Forrest could not have been a person who was involved in a contravention of that subsection pursuant to sub-s (2A). 72 The trial judge went on to consider s 677 of the Act and the issue arising thereunder as to the material effect of the non-disclosures in the event that, contrary to his earlier conclusion, the making of non-binding framework agreements should otherwise have been disclosed under s 674. As has been noted, the parties called expert evidence regarding the materiality of FMG's disclosures on decision-making by common investors as to whether to acquire or sell shares in FMG. His Honour examined this evidence at length in paras [472]-[625]. Sisson and Keene, experts called by ASIC, were experienced in making investments. They opined, as did Professor Watson, an expert in statistics also called by ASIC, that the 23 August announcement influenced the price of FMG's shares. The trial judge concluded that the 23 August announcements did not have "any statistically significant effect on the FMG share price". In this regard, his Honour relied on evidence from Mr Houston, a witness called by FMG, to the effect that it was not possible to say, at a level of confidence of 95 per cent, that a movement in share price was caused by a particular announcement. On the other hand, his Honour concluded at [608] that FMG's November announcements had a statistically significant effect on FMG's share price. 73 His Honour summarised his conclusions on this issue (at [57]-[58]): For the sake of completeness, although finding that ASIC's case under s 674 fails at this threshold, I have considered the further issue of materiality, assuming, contrary to my finding, that the Informations constituted, respectively, information which, in each case, was or ought to have been in the possession of FMG's directors and, accordingly, was information of which FMG was aware. By materiality I refer to the question whether the Informations constituted information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of FMG's securities. This is a question which may be approached on an ex ante or an ex post basis. ASIC and FMG each called expert witnesses to give evidence on the question of materiality. ASIC's expert witnesses were Mr Andrew Sisson, Mr Reginald Keene and Dr Iain Watson. FMG's expert witness was Mr Gregory Houston. Given the view I have come to about the materiality of the Informations, if my conclusion that FMG was not aware of this information for the purposes of Listing Rules 3.1 and 19.12 and s 674(2) of the Act is wrong, and the correct position is that FMG was or became aware of the legal effect of the framework agreements contended for by ASIC, beginning with knowledge of the legal effect of the CREC Framework Agreement on 23 August 2004, then I find that FMG was obliged to disclose the CREC Information not from 23 August 2004 but from 5 November 2004 when the notifications in respect of the CHEC and CMCC Framework Agreements were also made. That is because the CREC Information during the period 23 August to 5 November, in my view, was not information which would have or would be likely to have influenced common investors in the way provided for in s 677. The position is different from 9 November, in light of the actual notifications made, when in my view the release of the Informations would have had or would be likely to have had the relevant influence on common investors. the case against forrest 74 The trial judge's conclusions in respect of ASIC's case against Forrest were based primarily on his conclusions in relation to ASIC's case against FMG. His Honour said (at [68]): As ASIC's cases under s 674(2) and s 1041H fail it follows that its cases against Forrest in respect of accessorial liability under s 674(2A) for the alleged contraventions of the continuous disclosure provisions by FMG and for the alleged breach of directors' duties under s 180(1) must also fail. 75 His Honour elaborated upon this conclusion (at [903]): I have already concluded that FMG by its directors including Forrest was not "aware" of the legal effect of the framework agreements propounded by ASIC. I have also found that FMG's opinion which underpinned its disclosures as to the legal effect of the framework agreements was reasonably and honestly held by it through its board including Forrest. 76 His Honour went on to make the point that, in his view, Forrest did not need to rely upon the "business judgment defence" provided by s 180(2) of the Act. In this regard, the trial judge said (at [904-905]): I consider that Forrest exercised his powers and discharged his duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of FMG in FMG's circumstances; and if they occupied the offices of Forrest within FMG and had the same responsibilities within FMG as Forrest. Forrest, as I have explained earlier in detail, as a consequence of his own appreciation of the decision in Anaconda; his reliance on the legal oversight and advice of Huston; and his appreciation that the Chinese Contractors held the same view that the framework agreements were legally binding, had reasonable grounds for approving or permitting to be made the disclosures, complained of by ASIC, by FMG between August 2004 and March 2005. I am well satisfied that Forrest acted reasonably to ensure that FMG both complied with s 674 of the Act and did not contravene s 1041H of the Act. He did not breach s 180(1) of the Act as alleged by ASIC or at all. Given the conclusions to which I have come concerning ASIC's case under s 1041H I do not consider it necessary to deal with Forrest's further defence based in s 180(2) concerning the Business judgment rule. 77 The trial judge commented adversely upon ASIC's pursuit of a case of deliberate dishonesty against Forrest. His Honour said (at [69]-[70]): Allegations of dishonesty made by ASIC against directors, in legal proceedings, are self evidently serious. They carry considerable weight and will often, as in this case, attract wide media coverage. That they are made by the corporate regulator may injure the business of the particular company and will tend to adversely affect the reputations of those against whom the allegations are made. Unless the allegations are withdrawn the director(s) accused have to wait until trial before these can be tested. Meanwhile they have to live and work in their shadow. In this case the proceedings have been on foot for more than three years. For at least these reasons, it is important that allegations of dishonesty should be made only where there is a reasonable evidentiary basis for them. It is my opinion that on the totality of the evidence available to ASIC there was no such basis in this case…The reasonableness of FMG's opinion was strongly contended for by senior counsel for both FMG and Forrest at trial. It was an opinion which I consider was reasonably open. In my view, these allegations of dishonesty should not have been made. PERIPHERAL MATTERS 78 It is convenient to note here some other issues considered by the trial judge. At trial, the respondents had submitted, on the basis of the decision of the High Court in Briginshaw v Briginshaw (1938) 60 CLR 336, that given the seriousness of the allegations made by ASIC, the standard of proof should be "as close to the criminal standard as could be in any civil proceeding" (at [72]). The trial judge held that the standard of proof to be applied is the balance of probabilities as prescribed by s 1332 of the Act. His Honour said (at [82]): In conclusion, the standard of proof that I must apply is the balance of probabilities as prescribed by s 1332, and I accept that in deciding whether ASIC's allegations are made out on the balance of probabilities I am required to take into account the causes of action and the gravity of the matters alleged and their consequences: s 140(2) Evidence Act; Briginshaw 60 CLR 336. If inferences are to be drawn, ASIC has to establish that the circumstances appearing from the evidence give rise to a reasonable and definite inference and not merely to conflicting inferences of equal degrees of probability: Australian Securities and Investments Commission v Macdonald (No 11) (2009) 256 ALR 199 at [186]; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission 162 FCR 466 at [38]. 79 FMG foreshadowed that it would call evidence from some of its executives; in the end, these witnesses did not give evidence. ASIC submitted that this gave rise to a Jones v Dunkel inference against FMG and Forrest. His Honour rejected this submission. The trial judge said (at [108]): As ASIC's senior counsel put it, in ASIC's closing written submissions, generally, the evidence upon which ASIC relies to establish all of the alleged contraventions is documentary, and founded upon FMG's own business records. This evidence is supplemented by certain alleged admissions…derived from transcripts of examinations conducted by ASIC pursuant to s 19 of the ASIC Act: ASIC's closing submissions [47]-[48]. ASIC withdrew from tender alleged admissions made by Forrest during his s 19 examination. This was so despite the fact that Forrest who had not claimed privilege, as he might have done during his examination sought to have additional parts of his transcript admitted which he said would put in context and explained what ASIC contended amounted to admissions against Forrest's interest. The additional evidence, I infer, would have been favourable to Forrest. If ASIC considered that, despite this additional evidence, the transcript nonetheless disclosed relevant admissions then it would, no doubt, have persisted with its tender. However, I was denied the benefit of any of this evidence. ASIC has not identified any particular matters that the evidence of the executives, including Forrest, would elucidate. For these reasons, I decline to make any Jones v Dunkel inference against FMG from the failure of Forrest and the other executives to give evidence. 80 The trial judge also adverted to issues which arose as to the applicability of the rule in Browne v Dunn (at [109]), and as to the admissibility of confessions which ASIC alleged to have been made by FMG executives in response to examinations conducted by ASIC under s 19 of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) (at [114]). 81 These issues are peripheral to the resolution of this appeal: they do not affect my view of the resolution of the arguments agitated in this Court by the parties to the appeal. The Arguments in this court ASIC's arguments 82 ASIC challenges the trial judge's basal proposition that statements in the letters to the ASX and press releases of the meaning and legal effect of an agreement must "necessarily" be regarded as statements of opinion as to the legal effect of the framework agreements. The trial judge erred in failing to focus upon the effect or likely effect of the statements, in the circumstances in which they were made, on the minds of ordinary and reasonable members of the class of persons, such as investors, to whom it was addressed. 83 ASIC accepts, as it did below, that the framework agreements were "binding", but only in the limited sense that they were agreements to agree on a contract to build finance and transfer the infrastructures. As such, they were not effective to bind the Chinese Contractors legally to build and transfer the Project at a fixed price on the basis of finance by way of deferred payment. 84 ASIC contends that the framework agreements imposed no legally enforceable obligations on the Chinese Contractors to design, build, finance or transfer the relevant infrastructure; were not in the form of build and transfer, or design and construct, contracts of the kind known in the international construction industry; did not provide any terms fixing or providing for the fixing of the price for the construction of the infrastructure; did not define the works, set out agreed construction schedules, or define Practical Completion; and did not transfer the majority of the Project risks to the Chinese counterparty. ASIC argues that the framework agreements contained no statement of price, no mechanism for determining price, and no agreement on the work to be carried out. On this footing, it is submitted that the framework agreements were merely agreements to negotiate, and therefore not enforceable in any substantial sense. 85 ASIC argues that the trial judge erred in focusing upon the question whether the agreements made by FMG and the Chinese Contractors were binding to the exclusion of the separate but related question as to the accuracy of FMG's description of the obligations by which the parties had bound themselves to each other. ASIC submits that the trial judge erred in failing to resolve this key issue, namely, whether the statements that the agreements were to "build and transfer" the Project, and that the Project was to be constructed according to a "fixed price" were accurate. 86 ASIC draws attention to substantial discrepancies between statements in FMG's letters and media releases to the ASX and the contents of the framework agreements. In particular, each of the framework agreements: did not contain any term which obliged the Chinese Contractor to "build, finance or transfer the relevant infrastructure to FMG"; did not describe the works to be performed; and did not fix the price; 87 The last of these discrepancies is said to arise by reason of certain statements, made by Forrest at a press conference held on 23 August 2004, that the "fixed price agreement" relating to the price of the railway line and rolling stock was "confidential" but "competitive". In truth, there was nothing confidential in the framework agreements and accordingly no reason why the actual terms could not have been disclosed to the ASX. Disclosure of the document would have shown that the price was not fixed by the CREC agreement. 88 In respect of the 5 November announcement, the statement that China will be involved in the "financial packaging and construction schedules for all three elements of this massive undertaking" is said by ASIC to convey the impression that the framework agreements contain agreed construction schedules: that was simply not the case. The capitalised use of the term "Practical Completion" is also said to indicate that it is a term defined in the contracts, when it is not. 89 The announcement of 8 November did not correct earlier statements which were said to convey that the agreements were common form Build and Transfer contracts containing detailed provisions as to the agreed scope of the works, construction scheduling, Practical Completion, price and the agreed allocation of finance and construction risks. 90 ASIC also argues that FMG was under an obligation to disclose that the framework agreements could not be performed because of the unsatisfied conditions as to NDRC approval, and that no finance or other investment would be provided by the Chinese companies, without NDRC approval and the provision of an equity interest to the Chinese parties. Failure to do so meant that the announcements were misleading. There was, it was said, no evidentiary basis for the trial judge's view that NDRC approval was merely a formality. 91 On the issue of the likely influence of the original announcements upon investors in deciding whether to acquire or dispose of FMG shares, ASIC argues that the trial judge erred in treating a statistical analysis of the effect of the announcements on the FMG share price as determinative of the issue in favour of FMG. 92 Finally, ASIC argues that the trial judge erred in his approach to ASIC's case under s 674. ASIC argues that because FMG's statements to the ASX were misleading, it was obliged to disclose the terms of the framework agreements to correct the misleading impression FMG had created. That is, the relevant "Information" that the trial judge should have held constituted information for the purposes of s 674 and was required to be disclosed was the actual terms of the framework agreements. It is not correct to say that the only information of which FMG was aware was its own opinion as to the reasonably arguable meaning or legal effect of the framework agreements: FMG was aware of the terms of the framework agreements. Nor can it be said that awareness of the terms of the framework agreements involved a judgment or opinion. FMG's arguments 93 In this Court, FMG put at the forefront of its case the submission that the framework agreements were indeed binding agreements to build, finance and transfer the infrastructure. Because the representations were accurate, there was no breach of FMG's obligation not to mislead or deceive the investing public, and no breach by FMG of its disclosure obligation under s 674 of the Act. That more detailed agreements, not different in intent from the framework agreements, were intended to replace them in due course did not detract from their meaning and effect. This contention was based on the submission that the framework agreements sufficiently identified the project by reference to the PFS. The descriptions in the PFS would enable the "third party determination" provisions in cl 1.2 of each of the framework agreements to operate to fix the scope of the works, the price and the schedule for performance in case of any disagreement between FMG and the Chinese Contractors. FMG, by notice of contention, relies upon this submission as a complete answer to ASIC's case. 94 Further, in relation to s 674 of the Act, FMG argues that because FMG's executives and officers reasonably believed that the framework agreements were binding, they were not "aware" of the "Information" that the agreements were merely agreements to agree. 95 FMG also argues that the Information ASIC alleges it should have disclosed would not have had a material impact on the price of FMG securities. In particular, if the framework agreements were merely agreements to agree, then this information could not be reasonably viewed as material at least as at 23 August 2004. FMG contends that the statements published by FMG must be understood in their context. That context includes the fact that members of the investing public were aware that the Project was speculative in nature, contingent upon a completed DFS, and generally subject to many other risks relating to project finance, the quality and quantity of iron ore in the reserves, and whether there was sufficient demand for ore to generate supply contracts. Understood against this background, the statements by FMG to the ASX would not have influenced the decision making processes of common investors to acquire or sell shares in FMG. 96 As to the issue relating to correctional disclosure, FMG argues that it is only if its erroneous statements to the ASX had a material positive effect on the price of shares in FMG that corrective disclosure by notification to the ASX was required by s 674(2)(c) of the Act. FMG's announcements of 23 August did not have a material positive effect on FMG's share price; accordingly, so FMG argues, corrective disclosure was not required in relation to the 23 August announcement. On the other hand, FMG accepts that corrective notification was required after 9 November. Forrest's arguments 97 Forrest adopts the arguments advanced on behalf of FMG. Forrest contends that he was not "aware" of any information that was required to be disclosed under s 674. Alternatively, Forrest argues that he had honest and reasonable grounds for approving or permitting FMG to make the disclosure complained of by ASIC. 98 In any event, Forrest argues that he is entitled to rely upon the defence in s 674(2B) of the Act. Forrest also claims the benefit of the "business judgment rule" and that his judgment in allowing FMG to make the disclosures complained of by ASIC was based on good faith and was for a proper purpose. CONSIDERATION OF THE ARGUMENTS 99 The first question which arises from the parties' arguments is whether an ordinary and reasonable person, being a member of the investing public would have regarded FMG's statements to the ASX and others as asserting that the framework agreements obliged the Chinese Contractors to build, finance or transfer the relevant infrastructure as opposed to assertions of FMG's belief that the framework agreements could arguably be regarded as having that effect. If the answer is the former, then the second issue arises, viz, whether those assertions were accurate. The resolution of this second issue depends on whether the framework agreements were legally enforceable agreements to build and transfer the infrastructure for the Project. "Necessarily" a statement of opinion? 100 As a matter of general law, authority does not support the proposition that a statement about the existence or effect of a term of an agreement must necessarily be understood as a statement of opinion. In Aaron's Reefs, Limited v Twiss [1896] AC 273, Lord Herschell said, at 291: [T]he question to be determined was what idea would be conveyed to an ordinary man by a perusal of this prospectus, viewing each statement contained in it in the light of the other statements to be found there. 101 In Spencer-Bower's Actionable Misrepresentation (4th ed, 2000, Butterworths, London), it is said (at [28]): Statements of opinion, belief or information 'It is often fallaciously assumed', said Bowen LJ, 'that the statement of an opinion cannot involve the statement of a fact'. As with statements of intention, a statement of opinion, belief, information, or other condition of mind, whether of the representor, or of a third person, does involve at least one statement of fact, viz that the representor or other person entertained the opinion or belief, or possessed the information, at the date of the representation. It is not, however, a statement of fact as to the subject matter if it purports to be no more than a statement of opinion, belief, or information. On the other hand, if a person chooses to express in a statement of fact what he merely believes as opinion, or information, that statement will be a representation. So a statement which could be expressed as one of opinion, belief, or information may be expressed as a statement of fact. (Footnotes omitted, emphasis in original). 102 The issue of present concern does not arise under the general law but under statute. It is common ground between the parties that the authorities relating to the interpretation of s 52 of the TPA assist an understanding of s 1041H of the Act. In relation to s 52 of the TPA, it is settled that a statement may be misleading or deceptive even where there is no intention on the part of the maker to mislead or deceive. The real question is whether the statement is, in the circumstances of the case, apt to mislead those to whom it is published. In Yorke v Lucas (1985) 158 CLR 661, at 675, Brennan J (as he then was) said: Section 52 may be contravened by a corporation which does not intend that its conduct will mislead or deceive another person. The section does not import what in criminal law is called a specific intent, that is, an intention that the proscribed conduct should cause a specified result. Indeed, s 52 does not include a result – an actual misleading or deception of another – as an element. I respectfully agree with an observation by Gibbs CJ in Parkdale [(1982) 149 CLR at p 198], that "it is unnecessary to prove that the conduct in question actually deceived or misled anyone". What s 52 says is that a corporation which, in trade or commerce, engages in conduct which is in fact misleading or deceptive or which is in fact likely to mislead or deceive, contravenes the section. If a corporation engages in conduct that answers the statutory description, does the corporation escape liability if its officers and agents do not know or even suspect that its conduct is of that character? Gibbs CJ gave a negative answer to that question in Parkdale in the passage of his judgment on which Fisher J relied. I would give the same answer. … The question for the court…is whether the conduct of the corporation was, in all the circumstances, misleading or deceptive – i.e., apt to mislead or deceive – or likely to mislead or deceive. When the conduct constituting the contravention I the making of a false representation, it is immaterial that the corporation did not know that the representation was false when it was made. The essential facts to be established in sheeting home liability to a corporation under s 52 include the making of the representation and the falsity of the representation but not the corporation's knowledge of the falsity. (Footnote omitted.) 103 In the same case in the judgment of Mason ACJ, Wilson, Deane and Dawson JJ, the following appears at 666: It is, of course, established that contravention of [s 52] does not require an intent to mislead or deceive and even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive… 104 There are statements in the authorities which suggest that a statement will not be held to be "likely to mislead" if the only reason it might engender error in members of the audience is their making an erroneous assumption which would not be made by ordinary or reasonable persons in the same position as the audience. In this regard, in Campomar Sociedad Limitada v Nike International Limited (2000) 202 CLR 45 a unanimous High Court said, at [104]-[105]: It is here that there arises a critical question on the case put for the appellants. It concerns the so-called "doctrine" of "erroneous assumption" said to be derived from, in particular, decisions of the Full Court of the Federal Court in McWilliam's Wines Pty Ltd v McDonald's System of Australia Pty Ltd, Taco Co of Australia Inc v Taco Bell Pty Ltd and Lego Australia Pty Ltd v Paul's (Merchants) Pty Ltd. In their joint judgment in Taco Bell, Deane and Fitzgerald JJ emphasised that "no conduct can mislead or deceive unless the representee labours under some erroneous assumption". Their Honours went on to observe: Such an assumption can range from the obvious, such as a simple assumption that an express representation is worthy of credence, through the predictable, such as the common assumption in a passing-off case that goods marketed under a trade name which corresponds to the well-known trade name of goods of the same type have their origins in the manufacturer of the well-known goods, to the fanciful, such as an assumption that the mere fact that a person sells goods means that he is the manufacturer of them. Their Honours added that, in determining the question whether conduct properly should be categorised as misleading or deceptive or as likely to mislead or deceive, the nature of the erroneous assumption which must be made before conduct could have that character "will be a relevant, and sometimes decisive, factor". Their Honours rejected: [any] general proposition of law to the effect that intervention of an erroneous assumption between conduct and any misconception destroys a necessary chain of causation with the consequence that the conduct itself cannot properly be described as misleading or deceptive or as being likely to mislead or deceive. Nevertheless, in an assessment of the reactions or likely reactions of the "ordinary" or "reasonable" members of the class of prospective purchasers of a mass-marketed product for general use, such as athletic sportswear or perfumery products, the court may well decline to regard as controlling the application of s 52 those assumptions by persons whose reactions are extreme or fanciful. For example, the evidence of one witness in the present case, a pharmacist, was that he assumed that "Australian brand name laws would have restricted anybody else from putting the NIKE name on a product other than that endorsed by the [Nike sportswear company]". Further, the assumption made by this witness extended to the marketing of pet food and toilet cleaner. Such assumptions were not only erroneous but extreme and fanciful. They would not be attributed to the "ordinary" or "reasonable" members of the classes of prospective purchasers of pet food and toilet cleaners. The initial question which must be determined is whether the misconceptions, or deceptions, alleged to arise or to be likely to arise are properly to be attributed to the ordinary or reasonable members of the classes of prospective purchasers. (Footnote omitted.) 105 In the Full Federal Court's decision of National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) 49 ACSR 369, Dowsett J, with whom Jacobson and Bennett JJ agreed, helpfully summarised the principles relevant to the application of s 52 of the TPA. These principles include (at [18]): • When the representation is made to the public or to a section thereof, one must consider its effect upon an ordinary or reasonable member of the class in question. Although such class may include a wide range of persons, the ordinary or reasonable member will objectively be identified as having certain characteristics. In particular he or she can be expected to take reasonable care for his or her own interests and otherwise to behave reasonably. • It is necessary to inquire as to how a particular or anticipated misconception has arisen or may arise. In so doing, the Court will consider 'the effect of the relevant conduct on reasonable members of the class'. • Conduct will only be misleading or deceptive or likely to mislead or deceive if the representee "labours under some erroneous assumption" or may be expected so to labour. Such an assumption or anticipated assumption may be obvious, predictable or fanciful. • In assessing the reactions or likely reactions of the ordinary or reasonable member of the class, the Court may decline to treat as reasonable, assumptions which are extreme or fanciful. The initial question which must be determined is whether the misconception or deception, alleged or anticipated, is properly attributable to an ordinary or reasonable member of the class. • The "question whether particular conduct causes confusion or wonderment cannot be substituted for the question whether the conduct answers the statutory description contained in s 52." 106 When a question arises in a court as to whether certain facts give rise to a binding contract having a particular effect, that question is one of law for decision by the court in the light of the objective facts found by the court: the opinion of the actors as to the legal effect of their conduct or the interpretation of the agreement is irrelevant to that decision. But I am not here concerned with that kind of issue; rather, as the authorities show, the issue which arises under s 1041H of the Act and s 52 of the TPA is what ordinary and reasonable members of the investing public would have understood from FMG's announcements. It is the effect of a statement upon the persons to whom it is published, rather than the mental state of the publisher, which determines whether the statement is misleading or deceptive, or likely to mislead or deceive. 107 The trial judge proceeded on the basis (at [685]) that a "reasonable reader of the disclosures made by FMG and Forrest on FMG's behalf would have expected FMG to have a genuine and reasonable basis for making those statements". In support of this approach, his Honour referred to the statement in Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82, at 88, that an "expression of opinion which is identifiable as such conveys no more than that the opinion expressed is held and perhaps that there is a basis for the opinion", the trial judge concluded (at [686]) that the expression of FMG's opinion that the agreements were binding: misrepresented nothing. That there was scope for alternative opinions to be held as to the legal effect of the framework agreements does not mean that FMG engaged in misleading or deceptive conduct by asserting what it did based on its different opinion. I find that the disclosures complained of do not constitute misleading or deceptive conduct for the purposes of s 1041H. 108 In relation to the trial judge's reference to Global Sportsman, it may be said immediately that the passage cited was concerned with an "expression of opinion which is identifiable as such." 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". 109 If I tell an audience that I sold my car for $1,000 I would not ordinarily or reasonably be taken by my audience to be saying no more than that it is my belief that the terms of the document I have signed could arguably be interpreted by a court to mean that I have sold my car for $1,000. My statement would ordinarily and reasonably be understood as an account of what has actually occurred by way of the making of an agreement and of the terms which are contained in it. Statements of this kind would, it seems to me, ordinarily and reasonably be understood as statements to be accepted at face value rather than as assertions of a contestable opinion, which may or may not be accurate, depending on the view taken by a court. Thus in Middleton v Aon Risk Services Australia Ltd [2008] WASCA 239 at [21]-[23], McLure JA (as her Honour then was) with whom Murray A-JA agreed, said: It is essential to determine the precise terms of the representation in order to determine whether it is a statement of fact or opinion which in turn determines how the representation can be falsified. Whether or not a statement is one of fact or opinion depends upon all the relevant circumstances known to the representee, including the form in which the statement is made and the personal knowledge or likely personal knowledge of the person making the statement. The subject matter of the statement may also be relevant but is not necessarily determinative. Further, a person may make a statement of fact about what he or she merely believes as opinion. For example, a statement as to the value of property or the nature of its tenure may be in such form and made in such circumstances as to be a statement of fact not opinion: Spencer Bower, Turner and Handley, Actionable Misrepresentation (4th ed) [31], [32] and the authorities there cited. Thus, an unqualified assertion by a person who has, or is reasonably expected to have, personal knowledge of a matter may be a statement of fact not opinion. So too, a statement as to the content or general effect of a document, including a legal document, has been held to be a representation of fact: Spencer Bower, Turner and Handley at [43], [44] and the authorities there cited. 110 Spencer Bowen's Actionable Misrepresentation at [41], and [43] - [44] provides the following illustrations of this point: Statements as to documents A statement as to the existence of a document, or as to its character, contents or effect is a representation. A document is a thing and its existence is a fact. The words and figures contained in it, and its character and effect are also facts. Statements of all four kinds are representations, whatever difference may exist in the legal consequence of their falsity. … Statements as to contents of document A statement as to the wording or contents of a document is a statement of fact; and a misdescription or mistranslation of such contents is a misstatement of fact. Thus the following were held to be misrepresentations: a misreading of a release as an acquittance for arrears of rent; a misreading of a lease for a year as one for 21 years; a statement that a deed corresponded with a draft; misdescriptions of the contents of a draft lease; of the figures on a negotiable instrument; of the provisions of a will; of the contents of an Act of Parliament; of the terms of an engineering contract; a mistranslation to an Indian of a proclamation of sale in English; and an incomplete reading of a letter; or conditions of sale. Where the words of a head charter were impressed, before the bargain was struck, with an agreed conventional meaning which differed from their ordinary meaning, it was a misrepresentation for the charterers to forward the head charter to an intending sub-charterer without drawing attention to the true position. Statements as to effect and purport of a document Statements as to the general effect, import or object of a document, or of any provision therein, stand on the same footing as statements purporting to report the actual language used; the only difference being that the latter one assumes to be a transcript, and the former a summary, or description, of the contents. Statements of this character which have been held to be representations include: a description of the effect of a release of claims for personal injuries; a statement of the purport of contracts for the remuneration of directors; a summary of a government official's report on a mining district; a statement of the import of a letter offering property for sale; a statement that land was not the subject of a previous conveyance; a summary of the effect of contracts and orders for patented articles; a statement of the tenor of counsel's opinion; and a description of a public announcement of a sale by direction of the court. (Footnotes omitted.) 111 Neither s 52 of the TPA nor s 1041H of the Act erects a dichotomy between statements of fact and statements of opinion. As McPherson JA said in Heydon v NRMA Ltd (2000) 51 NSWLR 1 at [431]: A statement or representation which at common law might not perhaps give rise to liability because it is not one of fact, but of law or of opinion only, may nevertheless amount to "misleading conduct" for the purpose of s 52: see SWF Hoists & Industrial Equipment Pty Ltd v State Government Insurance Commission (1990) 6 ANZ Ins Cas ¶61-002; (76,688). That is because the effect of a representation falls to be judged under s 52 not, as at common law, by the state of mind or intention of the maker of the statement, but according to its effect or likely effect or impact on the person to whom it is directed: see Yorke v Lucas (1985) 158 CLR 661 at 666. However, in assessing its impact, a statement that is false is not necessarily misleading if, for example, it does no more than impart information apparently being passed on, for what it is worth, from another source without any concomitant belief in its truth or falsity: Yorke v Lucas (at 666); or if it is recognisable as an opinion that is not proffered or represented as necessarily being correct. In Inn Leisure Industries Pty Ltd (Prov liq app) v D F Mc Cloy Pty Ltd (1991) 28 FCR 151 at 167, French J said that: …Expert advice as to the law may convey the representation that it is based upon an underlying body of knowledge, experience or expertise possessed by the person proffering it or to which that person has access. The situations in which advice, expert or otherwise, as to the law may be misleading or deceptive for the purposes of s 52 will depend upon the context and circumstances in which it is proffered and the representations implied or expressed that accompany it. 112 In the circumstances of any particular case, the effect of a statement upon its audience may well vary, depending on the nature of the information conveyed and the terms in which it is couched. A representation may be couched in terms which are apt to be understood by an ordinary and reasonable audience only as a statement of opinion. On the other hand, a representation may be couched in terms which may ordinarily and reasonably be understood only as a statement of fact. In the first case, the existence of a reasonable basis for the statement means that the representation cannot be characterized as misleading or deceptive if the opinion is genuinely and reasonably held by the representor. That cannot be said in relation to the second category. 113 A statement which is ordinarily and reasonably understood as a statement of opinion is not apt to mislead if the opinion is genuinely and reasonably held by the maker of the statement. That is because the audience would understand that the statement was made on the basis that it expresses a view on which a different opinion might also be entertained, not a matter of fact about which no doubt can be entertained. 114 The authorities show that s 52 of the TPA and s 1041H of the Act allocate the risk of loss by reason of error in a statement made in certain prescribed circumstances, not to the audience, but to the maker of the statement. It would, I think, be contrary to the authoritative interpretation of these provisions if that risk of loss were to be reallocated so as to fall upon the persons to whom an erroneous statement is published because the statement was, in truth, only a matter of opinion even though it was couched in terms which would ordinarily and reasonably be understood as a statement of historical fact. 115 A statement which is ordinarily and reasonably understood as a narration of a matter of historical fact is likely to mislead those to whom it is published precisely because it is apt to dispel the caution with which the reception of a statement of opinion might otherwise be attended. It would reverse the distribution of risk of loss resulting from error effected by s 52 of the TPA and s 1041H of the Act to hold that a statement which is ordinarily and reasonably regarded by those to whom it is published as one of historical fact is not misleading or deceptive merely because it reflects an opinion honestly and reasonably held by the maker of the statement. 116 In my respectful opinion, the approach adopted by the trial judge artificially limits the protection afforded to the investing public by the Act by giving effect to a distinction which is not drawn by the legislation and not warranted by the facts of the case. If the trial judge's view were upheld, then responsibility for a statement presented as a statement of historical fact, could be avoided by the representor on the basis of reservations not apparent to the persons to whom the statement was published. It would permit reasonable belief in a matter of opinion to justify the making of a statement in terms not qualified so as to alert the audience to the possibility of a contrary view and the possible existence of reasonable grounds for the contrary view. That is an unattractive result. It is also inconsistent with the express statutory proscription of conduct which is "likely to mislead or deceive". Finally, that result is not supported by the authorities to which I have referred. The approach which I favour is not likely to be productive of commercial inconvenience such as might call the validity of that approach into question: the requirements of s 1041H could have been easily met in this case by the simple and obvious expedient of FMG publishing copies of the framework agreements to the ASX and the media at the outset. 117 The gravamen of FMG's announcements, both in August and in November, was that the parties had agreed upon terms summarised in the announcements. The passages in FMG's November media release to the effect that the infrastructure "is to be financed and built" under "Binding contracts [which] commit Chinese financing and construction support", and that "The three agreements now form a total project, construction and finance solution as follows: [CMCC] will provide a financing, design and construction package…[China Rail] has committed to the financing, design, and construction…[China Harbour] will provide the financing and construction" convey unequivocally that the Chinese Contractors have assumed legally enforceable obligations to build the infrastructure for the Project on terms which include deferred payment by FMG. While the announcements contained some assertions of evaluation or judgment, such as the likely effect of the framework agreements upon the future of the Project, 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. 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. 118 FMG argues that the investors would, by reason of publicly known information about the Project, have understood that the viability of the Project was dependent upon a "bankable" DFS, and that, because of this understanding, investors would also have understood that the framework agreements were not significant milestones in the progress of the Project towards success. But the terms of the 23 August announcement were apt to suggest that the construction of the railway for the Project was not entirely dependent on the production of a "bankable" DFS to ensure the availability of the necessary finance. The 23 August media release described the CREC agreement as "a major breakthrough" and that it serves to "underwrite" the Project's independent rail line from FMG's mines to Port Hedland. It stated that "Finalising this contract with CREC now paves the way to finance the rest of the project in a plain, vanilla manner should [FMG] so wish". I am unable to understand why ordinary and reasonable investors would not have taken this announcement to mean that the uncertainty which had previously attended the financing and construction of the railway for the Project was now resolved. This was the evident intention of the announcement: the natural inference is that it was likely to achieve its intended result: Gould v Vaggelas (1985) 157 CLR 215 at 236-239. Similarly, I am unable to accept the distinctly counter-intuitive argument that information that FMG's announcement was erroneous would not have been likely to influence investors in deciding to buy or sell shares in FMG. 119 Accordingly, I conclude that the trial judge erred in failing to conclude that FMG's public statements would have been understood as statements of fact by ordinary and reasonable members of the investing public. THE EFFECT OF THE FRAMEWORK AGREEMENTS 120 On appeal, ASIC argues that although the framework agreements were binding, so far as they went, they did not evidence a common intention that the Chinese Contractors should be immediately bound to build the infrastructure for the Project. It is submitted by ASIC that the binding effect of the agreements was limited to an intention to negotiate towards a final agreement. FMG argues that the agreements did bind the Chinese Contractors to build and finance the infrastructure for the Project. 121 A consideration of these arguments must begin with the proposition that a mere agreement to agree is not legally enforceable: Thorby v Goldberg (1964) 112 CLR 597; Booker Industries Proprietary Limited v Wilson Parking (Queensland) Proprietary Limited (1982) 149 CLR 600. An agreement to negotiate, unless clearly and unequivocally expressed, is rarely viewed differently: see Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1. 122 It is well established that the courts strive to uphold bargains: Hillas & Co Ltd v Arcos Ltd [1932] All ER 494. To that end, the courts will construe the terms of an agreement with an inclination to give effect to the intention of the parties, even if that intention has been obscurely expressed: Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98, esp at [6]-[8]. Further, the courts may, where circumstances permit, apply objective standards of reasonableness to prevent the intention of the parties being defeated. And where the want of an express provision in an agreement can be supplied by implying a term in order to give efficacy to the bargain, the courts will make the necessary implication: Fletcher Challenge Electricity Corporation of New Zealand [2002] 2 NZLR 433 at [64]-[67]; Moffat Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60. 123 But where the parties have not agreed upon the content of essential terms and have not agreed upon the application of an objective standard to measure their obligations or to provide a mechanism to fix the content of essential terms (as by third party determination), it is no business of the courts to foist upon the parties a bargain which they have not made. The trial judge referred to the decision of the Court of Appeal in England in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 as supporting the proposition that a legally enforceable agreement may be made even where issues as to price and quantity of subject matter had not been agreed (at [294]). In this regard, his Honour erred. In Pagnan, price and subject matter had been agreed. 124 In Hall v Busst (1960) 104 CLR 206, the majority of the High Court was of the view that an agreement to pay a fair value would be sufficiently certain to be enforced by a court only "when a recognized value or standard of value measuring the price existed": see at 216 per Dixon CJ, 222-223 per Fullagar J, 231-235 per Menzies J. It is not for this Court to say that the more liberal view of Kitto and Windeyer JJ, the minority judges in that case, viz. that an agreement to pay a reasonable or a fair value as a price is sufficient to conclude an enforceable contract, should now prevail. But even on the minority view, where the parties reserve a question as to essential matters such as subject matter or price for further agreement between them, a concluded contract has not been made. Whether one can speak meaningfully of an agreement as enforceable depends on the extent to which it might be enforced. If the Chinese Contractors had repudiated the framework agreements in mid-November 2004, FMG's entitlement to damages for loss of its bargain would not have extended beyond the exiguous measure of loss of opportunity to negotiate in good faith. Even if it were possible to read cl 1.2 of the framework agreements as providing for the fixing of the price by an independent person appointed by FMG, it would not be possible to establish the subject matter to be valued by that person. 125 In the present case, the critical issue under this rubric is whether the intention of the parties was to reserve the questions as to subject matter and price to further agreement between them, or whether they provided by cl 1.2 of the CREC Agreement (and its analogues in the other framework agreements) that these questions should be resolved by a third party should they be unable to reach agreement. I turn now to consider that issue. The parties' intention must be assessed objectively 126 Usually it will be the parties to a contract who are in dispute as to whether an intention to be contractually bound actually existed. In the present case, neither party seeks to dispute the existence of a common intention to be bound to build the relevant works. Instead, it is a third party, ASIC, which asserts that the relevant intention did not exist. The trial judge referred to evidence from FMG executives, and CREC, CHEC, and CMCC executives, that all parties involved intended that the agreements be binding, and that they viewed the statements in the media releases, that the companies had entered binding agreements to build the infrastructure, as accurate. But whatever may have been the subjective intentions of the parties on either side of the framework agreements, the crucial question is whether they made a contract to build the infrastructure and this question must be answered by taking an objective view of the agreement. As Gleeson CJ said in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, at 549: Where, as in the present case, the communications which the parties have exchanged are in writing, the question of their "intention" is, prima facie, to be resolved objectively, and as a matter of construction of the relevant documents. 127 In Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd, Gleeson CJ emphasised the importance of indications that the parties intended that the terms of their agreement should be resolved between them. At 551 his Honour stated that the communications between the parties revealed that: [I]n a context where it was contemplated that there would be express agreement on a number of important matters which the parties had not yet got around to discussing, or in respect of which their discussion were still at a very incomplete stage, the parties had made an agreement on the most important subject of their transaction, that is, the price, in the confident expectation that they would in due course come to terms on the other issues that needed to be addressed. 128 In the present case, the ineluctable reality is that the works the subject matter of the agreements were not agreed. As I have noted above, during the hearing of the appeal, a question arose as to whether the PFS had been made available to the Chinese Contractors for their consideration before the first of the framework agreements, the CREC agreement, was signed. This issue had not previously been raised by the parties, and so the trial judge was not asked to make a finding on this issue. Consequently he did not do so. 129 The evidence adduced at trial is not clear as to whether Recital B to the framework agreement referred to the PFS. It was not clear on the evidence that the PFS had been made available to the Chinese Contractors before each framework agreement was signed. As I have said, it was not part of FMG's case at trial to show that the works the subject of the framework agreements were described in the PFS. That is hardly surprising because the evidence shows that the description of the infrastructure in the PFS had been supplanted, so far as FMG was concerned, by FMG's decision to shift the site of its principal mine from the location stated in the PFS for another mine site. On 20 July 2004, FMG announced to the ASX that it had moved the focal point of its mining operations from Mt Nicholas to Christmas Creek. This decision had inevitable consequences for the design and layout of the works and the cost of production which were the subject of consideration in the DFS. 130 In these circumstances, I am unable to accept FMG's contention that the framework agreements should be interpreted on the basis that the parties were ad idem that the subject matter of the Project was the work described in the PFS. Accordingly, I am unable to accept that, objectively speaking, the framework agreements expressed a common intention that the Chinese Contractors were bound to build the infrastructure for the Project without an agreed description of the works that formed the subject matter of the contract. It is theoretically possible that the Chinese Contractors might be taken to have agreed to construct, at their own initial expense, whatever infrastructure FMG might require for whatever price FMG might ultimately agree to pay. But the Court must be slow to attribute to the parties the intention to achieve such an uncommercial result. 131 It must be borne in mind that this was a large, speculative project which had spent years in planning stages and would spend years in construction and operational stages, and in relation to which the preparation of the DFS to identify the work necessary to build the infrastructure had not been completed. In this regard, in G R Securities v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, McHugh J said, at 634: The magnitude, subject matter, or complexities of the transaction may indicate that the agreement was a limited one not intended to have legal effect: Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 at 316-317. 132 And in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd, Gleeson CJ said, at 548: It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron (at 360). That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that the parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same things as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention. 133 FMG's public announcements about the making of the framework agreements were widely publicised in Australia and China, and were reviewed by the leadership of both companies before and after publication, without objection or correction. The trial judge placed weight on these facts as indicators of the parties' objective intention (at [153] and [180]-[181]): Despite widespread media coverage of the release in both China and Australia, there was no correction sought by CREC to the 23 August Media Release which by reference was incorporated as part of FMG's notification to the ASX. As is clear from the evidence of Field [Managing Director of Field Public Relations] who also attended the November 2004 ceremony, every relevant entity in the room saw the 5 November Letter. ASIC accepted in its opening that there was evidence that CREC approved the 23 August Media Release. Senior counsel for ASIC, in opening, also advised the Court that CREC did not seek to disabuse anyone as to the correctness of the content of the 23 August Media Release prior to the publication of the AFR Article. … At no point before 24 March 2005, despite this widespread coverage in Australia and China, was there any correction made to such reporting by any of the Chinese Contractors. Nor was there any correction made by the NDRC or any other Chinese government authority. Nor was there any qualification made to any of the reporting such as that government approval had yet to be forthcoming or that the agreements were conditional upon an equity arrangement being achieved between FMG and a Chinese entity. I infer that CHEC and CMCC were satisfied that the content of the 5 November Media Release as well as other media reports in China were accurate. 134 It is hardly surprising that both sides to the framework agreements were eager to proclaim the success of their negotiations to that point. Any involvement on the part of the Chinese Contractors in the Project was a positive development, both for them and for FMG. That each side was enthusiastic about that involvement – and the potential benefits of that involvement – does not afford a reliable indication of the extent of the mutual involvement upon which they had actually achieved agreement. In this regard, it is important to bear in mind that the only statement by both sides of the terms on which they had actually reached agreement is to be found in the text of the framework agreements, including the recitals. I will discuss the effect of the recitals directly, but, for the moment, I note that the conduct of the parties does not suggest that the parties had agreed upon anything more than what was stated in the framework agreements. While it may be accepted that the parties' conduct made manifest an intention to "jointly develop and agree on…a General Conditions of Contract suitable for a Build and Transfer type contract" to build a port, railway, and process plant, there were necessary elements of the "contract" which they had in view, the content of which was not specified at all in the framework agreements, but upon which they intended to agree. 135 However compelling the evidence of each side's willingness to enter into a binding contract may be, the only operative statement of the content of the agreement which they had actually made is to be found in the text of each of the framework agreements. The content of the agreements as to subject matter, scheduling and price, was explicitly left to be agreed between the parties. The express terms of the framework agreements contemplate that the parties will seek to reach agreement on these matters. Those very terms are inconsistent with the fixing of the necessary content by the the Court's application of standards of reasonableness. 136 Lest it be thought that to adopt this view is to insist upon an unduly strict approach to the objective ascertainment of the common intention of the parties, it may also be said that there is substantial evidence which points to a conclusion different from that reached by the trial judge, both in respect of their objectively expressed common intention and even as to the subjective beliefs of FMG and Forrest. In an email dated 27 October 2004 from Forrest to Heyting and Huston, Forrest outlined his aims in relation to ongoing negotiations with the Chinese. The email was referred to in the primary judgment at [455] but his Honour did not explain what he made of it or how it was consistent with his conclusions. The email was in the following terms: Ed [Heyting] pls carry the day in the formulation of these Construction Commissioning contracts with Peter [Huston], particularly with Alan [Watling – Chief Operating Officer and Head of Port & Rail] out of the country and me out of the State – relying on you both heavily. Peter, please draw on any support required within FMG. So, let's go through the plan…. Mr Bai from China Rail (CR) is under pressure I believe to sign a detailed contract, as detailed enough to be binding on the total delivery of the project. He demanded it on my last visit. It may well be possible, if we can get it to him tomorrow, that Alan can take him through it and resolve anything contentious when he meets with CR on Monday, for signing potentially shortly thereafter While I am pushing for CR to ?take full responsibility for the commissioning and ramp up, ? a ceiling price of A$600m with incentives, ?guarranteed schedule with shipments in 2006, ?ASO standards etc… and these are all hard asks, due to the political pressure I sense CR is under – it may well be possible to execute this at the official ceremony after Alan has negotiated any deiscrepancies on Monday. In fact, CR specifically requested this detailed contract execution, but may not have been aware that it could take place this quickly. He did however suggest we sign the detailed agreement at that China Harbours and MCC ceremony. I believe he, Mr Bai from CR, will sign it. Then we start to really rock and roll! The contract on its own must be able to deliver the project, not in itself but as The Key, binding others to take all necessary steps (like engineering design) to deliver it. It must have sufficient detail in to really deliver the schedule, the financing and the project. It does not matter that other agreements still required are bound through this contract to be agreed but that this contract is the master and sets out what needs to be done. 137 Thereafter, negotiations ensued towards an "Advanced Framework Agreement" to supplement the Framework Agreement entered into with CREC on 6 August. Fortescue sent a draft of its version of the Advanced Framework Agreement to China on or about 2 November 2004, and received a reply shortly thereafter. The primary judge referred to this exchange of documents, concluding that the exchange of draft agreements strengthened FMG's case that CREC viewed the initial Framework Agreement as a legally binding agreement (at [459]): In my view the additions proposed by CREC are powerful evidence that CREC regarded the CREC Framework Agreement as a binding build and transfer agreement for the railway. They also demonstrate that CREC regarded the CREC Advanced Framework Agreement as a further agreement toward the objective of concluding the "fuller and more detailed agreement" contemplated under cl 7 of the CREC Framework Agreement. I do not regard the negotiations in respect of the CREC Advanced Framework Agreement as evidencing that FMG and Forrest knew that the framework agreements were not binding. 138 Several aspects of the Advanced Framework Agreement sent by FMG contrast sharply with the response received from the Chinese side. First, the Chinese parties "weakened" the recitals. The original draft, sent by FMG, provided: ADVANCED FRAMEWORK AGREEMENT DATED______________2004 PART A – THE PARTIES 1. FORTESCUE METALS GROUP LIMITED (ABN 50 002 594 872) of Fortescue House, 50 Kings Park Road, West Perth in the State of Western Australia, Australia ("FMG"); and 2. CHINA RAILWAY ENGINEERING CORPORATION of Block B, CREC Mansion, Southern Square, Beijing West Railway Station, Beijing, in the Peoples Republic of China ("CREC"). PART B – THE BACKGROUND 1. China Railway Engineering Corporation has represented that it has the necessary skills, personnel and equipment to carry out and complete the design and construction of the Railway for the Pilbara Iron Ore and Infrastructure Project. 2. China Railway Engineering Corporation and Fortescue Metals Group Limited have negotiated in good faith with a view to entering into this agreement for China Railway Engineering Corporation to carry out and complete the design and construction of the Railway for the Pilbara Iron Ore and Infrastructure Project on the terms and conditions set out in this Document. (Emphasis added.) 139 It can be seen that the Chinese side's response was to delete the statement that the parties have "negotiated in good faith with a view to entering to this agreement for [CREC] to carry out and complete the design and construction of the Railway": RECITALS A. By a framework agreement dated 6 August 2004 ("Original Date"), FMG accepted CREC's offer to carry out and complete the Build and Transfer of the Railway (The "Works") as defined in clause 4 for the Pilbara Iron Ore and Infrastructure Project (The "Project") upon the terms and conditions there set out ("Framework Agreement"). B. By a memorandum of understanding dated 1 September 2004 between CREC and BARCLAY MOWLEM CONSTRUCTION LIMITED (BM) agreed to enter into a joint venture for the purposes of undertaking the Works ("CREC"). C. The Parties now wish to enter into this Build and Transfer Framework Agreement Deed (the "Deed") in order to clarify various matters in the original Framework Agreement. D. CREC may with the consent of FMG, appoint subcontractors or other joint venture partners who will be bound by the conditions of this Deed. 140 This change may be said to be relatively modest, given the fact that the Chinese parties included Recital A, but the remaining differences are compelling. For example, the Chinese altered the definition of "Performance Date". Originally, this term was defined in FMG's draft as: the date when each of the following have been satisfied: (a) the Works are complete except for minor defects; (i) which do not prevent the Works from being reasonably capable of being used for their stated purpose; (ii) which FMG determines CREC has reasonable grounds for not promptly rectifying; and (iii) the rectification of which will not prejudice the reasonable and sensible use of the Works; (b) those tests, which are required by the General Conditions of Contract to be carried out and passed before the Works reach practical completion (as that term is defined in the General Conditions of Contract) have been carried out and passed; (c) documents and other information required under the General Conditions of Contract which, in FMG's opinion, are essential for the use, operation and/or maintenance of the Works, have been supplied to FMG or its nominee; and (d) the Railway has carried iron ore at a rate of at least 143,000 tonnes per day for a period of 120 consecutive days. (Emphasis added). 141 In the Chinese response, under the heading "Definitions and Interpretation" it is stated that: xi. "Practical Completion" and "Date of Practical Completion" have the same meaning as stated in "2 INTERPRETATION" of General Conditions of Contract of AS4300 142 The General Conditions of Contract of AS4300 provide that "Practical Completion" means: that stage in the execution of the work under the Contract when – (a) the Works are complete except for minor omissions and minor defects – (i) which do not prevent the Works from being reasonably capable of being used for their stated purpose; (ii) which the Superintendent determines the Contractor has reasonable grounds for not promptly rectifying; and (iii) rectification of which will not prejudice the convenient use of the Works; (b) those tests which are required by the Contract to be carried out and passed before the Works reach Practical Completion, have been carried out and passed; and (c) documents and other information required under the Contract which, in the opinion of the Superintendent, are essential for the use, operation and maintenance of the Works, have been supplied; 143 More important are the parties' conflicting proposals in relation to the "Value of the Work". In FMG's initial draft the relevant provisions were found in clause 4: 4 VALUE OF THE WORKS 1.1 The Parties agree to use their best endeavours to ensure that the Value of the Works is kept as low as possible and that in any event, the Value of the Works will not exceed AUD$600 million and that all costs, expenses or liabilities forming part of the Works will be incurred on an "at cost" basis without any mark up, addition or accretion whatsoever. The value of the works is expected by the Parties to not exceed AUD$600 million. In the unforseen event that the value of the works exceeds AUD$600 million, any such increase will be agreed only by a written variation between the Chairman of each of FMG and CREC. 1.2 CREC will provide FMG with full, open, unrestricted, immediate and transparent access to all details, data and information, however stored whether written or electronic, including without limitation, copies of all accounts, invoices, tenders, submissions, contracts, agreements, arrangements, notices or other information relating to all costs, expenses or liabilities forming part of the Value of the Works. 1.3 The Parties agree that in the event any savings in the completion of the Works result in the total Value of the Works falling below AUD$600 million, then CREC will be entitled to keep and retain for its sole account, one half of such savings. (Emphasis added.) 144 Under clause 1, headed "Definitions and Interpretation", the FMG draft also provided that: "Value of the Works" means the total cost of the Works including without limitation, all direct and indirect costs, expenses or liabilities of whatsoever type or nature and howsoever connected to the Works; 145 By comparison, the Chinese response deleted clause 4 entirely, replacing it with clause 3 headed "Financial Close": 3. FINANCIAL CLOSE FMG shall arrange funding for the total value of the Project by a combination of equity and debt (obtained by the commitment of various reputable international financial institutions) prior to the execution of the Formal Agreement ("Financial Close"). 146 Further, under their version of clause 1, the Chinese provided that "Value of the Works" was to mean: the total cost of the Works including without limitation, all direct and indirect costs, expenses or liabilities of whatsoever type or nature and howsoever connected to the Works, and overhead and profit; (Emphasis added.) 147 The exchange of draft agreements shows that the parties were not ad idem as to the manner in which the works were to be valued. Further, far from showing that the Chinese contemplated an agreement by which they were bound to secure financing, the amendments to the Advanced Framework Agreement show that they firmly believed securing finance was an issue for FMG. 148 Finally, the actual scope of the work remained vague. Clause 5 of FMG's draft repeated much the same terms as the original framework agreement: 5 SCOPE OF WORKS The Scope of Works includes but is not limited to the following: (1) earthworks for the foundations of the Railway including level crossings; (2) civil works associated with the construction of culverts and bridges; (3) above track works including ballast, sleepers, ties and rail; (4) signals and communications; (5) all rolling stock with the exception of locomotives; (6) detailed engineering design of the Railway (to Australian Standards); (7) project management and scheduling of the Works; and (8) procurement, construction and commissioning of the Works. 149 It should be noted that aside from this clause the only other definitions in FMG's draft relating to the project were under cl 1 as follows: "Project" means FMG's Pilbara Iron Ore and Infrastructure Project which is being established by FMG, further details of which are set forth in the stock exchange reports and the Annual Reports of FMG; "Railway" means the railway (for the Project) which is to comply with the specifications, location, type, quality and concept drawings as notified in writing by FMG to CREC prior to the Commencement Date; 150 Each of these differences between the two draft documents evidences a rejection of what Mr Forrest recognised could be "hard asks". The Chinese rejected provisions that would have allocated to them the full risk of the construction of the Project. The differences also show that price is left at large for further negotiation and that the parties still had competing conceptions of what constituted the "value of the works". These differences also show that there was no reasonable basis for the claim in the ASX letters and associated media releases that the initial framework agreements contained a "fixed price" under which CREC had assumed "100 per cent of the risk". As is apparent, these issues were still very much a subject of negotiation as between the parties. 151 The real significance, for the resolution of the present issue, of the conduct of the parties subsequent to the signing of the framework agreements is two-fold. First, the correspondence to which I have referred shows how far the parties were from a real consensus on subject matter and price and the impossibility of bridging that gap by a court-imposed insistence upon good faith on both sides. There is no reason to suppose that either side was not negotiating in good faith or that the requirements of good faith in negotiation required either party to "subordinate its own legitimate interest to the interests of the other party": see Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 at [147]. Secondly, the correspondence contains not the slightest hint of an expectation that the wide gap between the parties should or could be bridged by recourse to the determination of a third party. In this regard, 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 the infrastructure] until all the essential preliminaries had been agreed to": see Barrier Wharfs Limited v W Scott Fell & Company Limited (1908) 5 CLR 647 at 669. 152 The trial judge resolved the issue as to whether the NDRC had approved the execution by the Chinese Contractors of the framework agreements before they were signed on the basis that he accepted as truthful the oral evidence to this effect of Mr Xin, who was familiar with the relationship between the NDRC and the Chinese Contractors (at [740]). I would not be disposed to take a different view on this issue from that taken by the trial judge. On the issue of the ongoing discussions as to the extent of Chinese equity in the Project and Mr He's attempts to obtain majority equity from FMG, the outcome of these negotiations may well have been seen, from FMG's perspective, as "merely a formality". However, the ongoing negotiations about the issue of the extent of Chinese equity in the Project also serve to emphasise the preliminary character of the framework agreements. The Recitals 153 In evaluating the intention of the parties, the trial judge placed significant weight on the recitals at the beginning of each of the contracts. The first two recitals in each of the framework agreements provided: A. [CREC, CHEC, or CMCC] has represented that it has the necessary skills, personnel and equipment to successfully carry out and complete the Build and Transfer of the [railway, port, and mine and process plant, respectively] (the "Works") for the Pilbara Iron Ore and Infrastructure Project (the "Project") and the FMG is relying on the [CREC's, CHEC's, or MCC's] representation. B. [CREC, CHEC, or MCC], having closely examined all proposed documents, has submitted an offer to execute the Works and the FMG has accepted the [CREC's, CHEC's, or MCC's] offer and the parties now wish to evidence their agreement. 154 Of these recitals, his Honour said (at [282]-[283]): The proper construction of an agreement should be determined by what reasonable people in the position of the parties would have understood by the relevant clauses by considering not only their text, but also the surrounding circumstances and the purpose and object of the transaction: e.g. Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]; International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 at [8] and [53]. The whole of the document should be considered and its provisions given harmonious effect: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 (Gibbs J, in dissent, but not on the applicable principle). Recital A makes plain that CREC had represented that it was able to complete the "Build and Transfer" of the railway Works, and Recital B makes plain that it had offered to do those Works. FMG had accepted that offer, and the parties wished to evidence their agreement. FMG says these recitals have all the hallmarks of an intention to contract for the build, transfer and financing of each component of the Project infrastructure. 155 It may be accepted that the recitals do show an intention to conclude an agreement in relation to the construction of the infrastructure for the Project. Nevertheless, it is to the operative terms of the framework agreements that one must look to see how far that intention had been consummated by the execution of those agreements. 156 There is a valuable discussion by Campbell JA in Franklins Pty Ltd v Metcash Trading Ltd (2009) 264 ALR 15, at [379]-[390], of the extent to which recitals may be used to interpret obligations in the operative part of a contract. The issue must be assessed on a case-by-case basis; it necessarily depends on the entirety of the circumstances of the case including, importantly, the operative terms of the agreement. Campbell JA said at [380]: Because of this variety of recitals, and because the task of the court is to interpret the particular document that is in dispute, statements in cases to the effect that recitals should always be treated in some particular way in construction of an agreement should be treated with caution, and as subject to the context in which they were uttered. In particular, relevant types of context could be the type of recital that was being considered in the particular case, the type of operative provision the recital is sought to be used as an aid to construction of, and whether other assistance can be derived from other operative provisions of the document in construing the provision that is in question. 157 In this case, the question is whether the operative terms of the framework agreements carried the intention reflected in the recitals into effect, or whether the consummation of the intention reflected in the recitals was left for later agreement. The recitals afford limited assistance in answering that question in that the operative terms provide the only available evidence as to how far the intention to reach agreement has been carried. 158 The trial judge referred to the statement of Mason J in Ansett Transport Industries (Operations) Pty Limited v The Commonwealth of Australia (1977) 139 CLR 54, at 72, as support for his approach. Mason J said: No doubt it is correct to say that, where in the recitals to a deed or an agreement it is acknowledged that the parties have agreed to do, or will do, certain acts, a promise to do those acts will be read into the agreement in the absence of an express promise to that effect. Then, there being no indication of a contrary intention, it may safely be inferred that the absence of a contractual provision was due to oversight or inadvertence. 159 This statement does not support the trial judge's approach. In this case, the "absence of a contractual provision" of the kind spoken of by Mason J was not "due to oversight or inadvertence". Rather it was due to the fact that the terms of the promises necessary from each side to give content to an agreement to build and transfer had not been agreed. Masters v Cameron 160 Each framework agreement contemplates the execution of a further agreement. By cl 1.1 of each of the framework agreements, the parties agreed to agree and to develop the terms of a contract for the construction of the infrastructure for the Project. At this point, one may refer to the observations of the High Court in Masters v Cameron (1954) 91 CLR 353 at 360-362: Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v Miller [(1878) 3 App Cas 1124] when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation. His Lordship proceeded: "…as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed" [(1878) 3 App Cas, at p 1151] : see also Sinclair, Scott & Co Ltd v Naughton [(1929) 43 CLR 310, at p 317]. A case of the second class came before this Court in Niesmann v Collingridge [(1921) 29 CLR 177] where all the essential terms of a contract had been agreed upon, and the only reference to the execution of a further document was in the term as to price, which stipulated that payment should be made "on the signing of the contract". Rich and Starke JJ observed [(1921) 29 CLR, at pp 184, 185] that this did not make the signing of a contract a condition of agreement, but made it a condition of the obligation to pay, and carried a necessary implication that each party would sign a contract in accordance with the terms of agreement. Their Honours, agreeing with Knox CJ, held that there was no difficulty in decreeing specific performance of the agreement, "and so compelling the performance of a stipulation of the agreement necessary to its carrying out and due completion" [(1921) 29 CLR, at p 185]: see also O'Brien v Dawson [(1942) 66 CLR 18, at p 31]. Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own: Governor & c. of the Poor of Kingston-upon-Hull v Petch [(1854) 10 Exch 610 [156 ER 583]]. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v Parker [(1950) 80 CLR 304] or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter v Miller [(1878) 3 App Cas 1124]. Lord O'Hagan said: "Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made" [(1878) 3 App Cas, at p 1149]. And Lord Blackburn said: "parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement" [(1878) 3 App Cas, at p 1152]. So, as Parker J said in Von Hatzfeldt-Wildenburg v Alexander [(1912) 1 Ch 284, at p 289] in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. The question depends upon the intention disclosed by the language the parties have employed, and no special form of words is essential to be used in order that there shall be no contract binding upon the parties before the execution of their agreement in its ultimate shape: Farmer v Honan [(1919) 26 CLR 183]. 161 The framework agreements are not in the first category spoken of in Masters v Cameron. Not only do the framework agreements anticipate the execution of a further contract but they do not, in terms, manifest an existing consensus upon the subject matter of the work, or the price, or the schedule for performance. These are matters essential to the conclusion of an enforceable contract to build and transfer the infrastructure for the Project. 162 True it is that cl 7 of each of the framework agreements expresses an intention that the agreements have immediate effect even though the execution of a further agreement is contemplated. One must, however, direct attention to the terms of the framework agreements which address the issues of subject matter, price, and scheduling of performance. In this regard, cl 1 expressly provides that the parties will "jointly develop and agree" on subject matter, price, and scheduling. 163 FMG, recognising the difficulty posed by the evident absence of agreement between the parties on these essential terms, argues that the subject matter of each of the framework agreements was sufficiently described in the PFS and that the issues as to the scheduling and price of the works were intended to be resolved by determination under the mechanism in cl 1.2 in the event that the parties were to fail to reach agreement on those issues through the process contemplated by cl 1.1 of each framework agreement. Third party determination of terms 164 FMG relies principally upon the proposition stated by Walsh J (with whom Mason J agreed) in Godecke v Kirwan (1973) 129 CLR 629 at 642 that: It is clearly established that a binding agreement may be made which leaves open some important matters, eg the price, to be settled by the decision of a third party. I agree with respect with the view of Bray CJ [in Powell v Jones [1968] SASR 394 at 398] that, subject to the qualifications to which he refers, there is no reason in principle for holding that there cannot be any binding contract if some matter is left to be determined by one of the contracting parties. (Footnote omitted.) See also Council of the Upper Hunter Valley County District v Australian Chilling and Freezing Co Limited (1968) 118 CLR 429 at 437; Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd's Rep 205 at 210. 165 In Godecke v Kirwan, the terms of a contract for the sale of land which had not been agreed were left to be settled by the solicitors for the vendor. FMG points to clauses 1.2 and 2 of each framework agreement and contends that these clauses establish that any absence of agreement as to the subject matter of the contract, the price and scheduling, will be authoritatively resolved by a person or persons within the employ of FMG. In Godecke v Kirwan at 645, Gibbs J agreed with Walsh and Mason JJ that contractual terms may be left for determination by a third party but not by one of the parties themselves. It is not necessary to enter upon this area of difference between Gibbs J and the other members of the Court in Godecke v Kirwan. It is convenient now to look more closely at the terms of the framework agreements. 166 Clause 1.1 of the CREC agreement expressly obliged FMG and CREC to "jointly develop and agree on" a range of matters including: Scheduling of the Works Determination of the Value of Works (Emphasis in original.) 167 Clause 1.2 expressly obliged CREC to co-operate with FMG in respect of FMG's undertaking of: Technical peer review. Independent review of the schedule and value of the Works. (Emphasis in original.) 168 The terms of these provisions and their collocation do not disclose an intention that the person or persons referred to in cl 1.2 are authorised to resolve differences which might arise in the process prescribed by cl 1.1. 169 It may be accepted that the term "value" used in cl 1.1 is used to establish the price payable by FMG for the carrying out of the Works. That this is so is apparent from the terms of cl 3 of the CREC agreement, whereby FMG's obligations in relation to payment are expressed by reference to the value of the Works. 170 It may also be accepted that the carrying out of the Works was intended to commence forthwith, and not upon the execution of a further instrument, as is apparent from the terms of cl 4. That intention is also expressed by cl 7. But that does not mean that the process of agreement was complete: it is readily apparent that it was not. The question is whether the parties agreed upon a means to ensure the completion of that process. 171 The argument put to this Court by FMG in support of an affirmative answer to that question can succeed only if cl 1.2 is to be understood as providing for the determination of necessary terms in the event that the process contemplated by cl 1.1 fails. I am unable to read cl 1.2 as having that operation, as opposed to the effect of providing for assistance to facilitate the process of development and agreement referred to in cl 1.1. 172 Counsel for FMG posed a rhetorical question in relation to cl 1.2 of the framework agreements. In effect, that question was: "If this clause was not intended to provide a deadlock resolution mechanism, what purpose was it intended to serve?" Counsel for ASIC responded to this challenge: "Clause 1.2 is intended to facilitate the process of development and agreement outlined by cl 1.1 and to which cl 1.2 is an adjunct". 173 In my respectful opinion, ASIC's response is compelling. The process of "technical peer review" is more easily understood as a process for correcting errors in engineering design and detail, rather than a process for establishing the subject matter of the contract, and the valuation referred to in cl 1.2 is more easily understood as a process intended to assist the parties to reach the agreement contemplated by cl 1.1 than as a mechanism for fixing the value or price of the works. In this regard, reference may be made (see Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 196) to Ricketts, Loftin and Merritt, Standard Handbook for Civil Engineers 5th Ed, McGraw-Hill at 2.9: Peer Review. This is a procedure employed by a firm for a specific project wherein the firm contracts with an outside group, the "peer", to review polices and practice for the purpose of achieving the highest level of quality in design of the project. A peer review is conducted by designers with the same expertise as those who prepared the design and who have no relationship with the designers and are totally independent…The review should result in a report of the findings of the peers…A peer review, unlike other design reviews, does not have a specific objective other than quality, such as cutting construction or life-cycle costs, value engineering, or a constructability review performed as part of construction management. 174 Insofar as cl 1.2 provides that FMG will undertake "Independent review of the schedule and value of the Works", that language does not lend itself to interpretation as: FMG will undertake "Independent determination of the schedule and value of the Works in the event that the parties are unable to reach agreement under cl 1.1". Clause 1.2 is expressed to operate immediately upon the signing of the framework agreement. This tends to confirm that cl 1.2 is intended to facilitate the process contemplated by cl 1.1 rather than to provide a mechanism for the resolution of a failure in that process. And one cannot ignore the significance of the obvious absence of the word "determination" in cl 1.2. If the parties had indeed intended to commit the determination of the terms of this huge project to the decision of a third party in the event that they were unable to reach agreement they would surely have used explicit language to convey that intention. 175 The difficulty I have in acceding to FMG's submission on this point is compounded by the absence of a sound basis for FMG's submission that the parties entered the framework agreements on the footing that "the Works" referred to in the recitals were described in the PFS. As I have noted, FMG's decision to change the site of its principal mine after the PFS had been completed rendered the PFS irrelevant. 176 Accordingly, I am unable to accept FMG's submission that cl 1.2 created a third party determination mechanism which would supply the content of the framework agreement in respect of subject matter, scheduling and price in the event that the parties were unable to reach agreement on these matters pursuant to cl 1.1. 177 It follows that, in my respectful opinion, FMG's announcements contravened s 1041H of the Act. It is unnecessary to decide whether the framework agreements should be categorized as agreements to agree or simply void for uncertainty. On neither view can they be accurately described as binding agreements to build, finance, and transfer the infrastructure for the Project. 178 Before I part with this aspect of the case, I note that FMG made a number of presentations to industry conferences in November. At these conferences, FMG stated that funding for the infrastructure was "under agreement" in the following sums: $630 million for the railway, $306 million for the mine, and $571 million for the port. The trial judge held that these amounts reflected FMG's own estimates of capital costs rather than amounts which had actually been agreed between FMG and the Chinese Contractors (at [864]). 179 In relation to one of these conferences, the RIU Explorers Conference, the trial judge declined to find that the audience consisted of actual or potential investors (at [654]-[659]). On that basis as well, his Honour found that ASIC's case of contravention of s 1041H failed because ASIC had failed to demonstrate that FMG's statements were made in relation to "a financial product" for the purposes of s 1041H. 180 In this Court, ASIC argues that the terms of FMG's presentation, which included slides referring to "New Floats, New Finds, New Mines" afford a sufficient basis for inferring that the audience included potential investors. It is unnecessary to reach a concluded view upon this submission, because even if the trial judge's view on this point were correct, FMG contravened s 52 of the TPA. SECTION 674 181 The conclusion that the framework agreements were not enforceable agreements which obliged the Chinese Contractors to construct the infrastructure means that ASIC's case under s 674 must also succeed. It is unnecessary to resolve the other questions raised by the parties' arguments in relation to s 674 of the Act. It is sufficient to say that once the misleading statements had been made by FMG, s 674 required that they be corrected. 182 It is necessary here to examine more closely the approach of the trial judge to the resolution of this issue. His Honour said (at [19]-[24]): The core of ASIC's case under s 674 is its contention that the framework agreements did not, in their effect, oblige the Chinese Contractors to build, finance and transfer the infrastructure but at best, merely bound the parties to negotiate agreements which would have that effect, or, alternatively, were not binding at all. ASIC thus offers two alternative interpretations of the legal effect of the framework agreements. It is this "information" as to the asserted legal effect of each of the framework agreements which is central to what is described as the "CREC Information", the "CHEC Information" and the "CMCC Information" (the Informations), which ASIC pleads ought to have been disclosed, variously, between 23 August 2004 and 24 or 29 March 2005 in the case of the CMCC framework agreement and 24 or 30 March 2005 in the case of the other two framework agreements. ASIC says that FMG was obliged to disclose the Informations to the ASX under s 674(2) because that information, for the purposes of s 677, a provision which interprets s 674(2)(c)(ii) by providing for when a reasonable person would be taken to expect information to have a material effect on the price or value of an entity's securities was information which would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of FMG's securities. ASIC pleads the alleged contraventions of s 674(2) by FMG under three categories applying to FMG's alleged failure to disclose each of the Informations. There are three contraventions alleged under each category, one in respect of each of the Informations, but ASIC only presses a total of six rather than nine contraventions of s 674(2) as the alleged contraventions under the second category are pleaded in the alternative. FMG submits, and I accept, that upon analysis, there are in substance only three possible contraventions of s 674(2), one in respect to each of the CREC, CHEC and CMCC Framework Agreements. I do not accept, as ASIC would have it, that there are 6 (or 9) possible contraventions because the alleged contraventions of s 674(2) relate to the omission to inform the market about the material terms and legal effect of the framework agreements. The three categories are as follows. First, ASIC asserts that FMG failed to disclose the Informations: ASC [136]-[140]. Second and alternatively, it is asserted that FMG's purported compliance with the requirement that it notify information to the ASX under s 674(2) and Listing Rule 3.1 was not substantially accurate; further or alternatively was misleading or deceptive or likely to mislead or deceive persons who commonly invest in securities: ASC [141]-[145]. This was described in ASIC's pleading as FMG's disclosure of false information. Third and alternatively, it is asserted that FMG failed to correct these earlier false disclosures of information: ASC [146]-[153]. I agree, as FMG submits that the first and the third categories are almost identical. This is because the first complains about the omission from disclosure of the Informations and the third complains about the omission from disclosure of effectively the same information. As to the second category, ASIC's assertion is that, on their proper construction, s 674(2) and Listing Rule 3.1 forbid substantially inaccurate disclosure, or disclosure that is misleading or deceptive or likely to mislead or deceive. FMG submits that on their proper construction, these provisions do not target such matters in that way but rather require the disclosure of omitted material. I accept this submission. Section 674(2) does not, in terms, impose an obligation upon FMG to correct information already provided to the ASX. The focus of the provision is upon the notification of information. It is a continuing obligation. This is ASIC's first category. The fact that the later provision of information may, in its effect, correct a misstatement in a notification made earlier, is merely a consequence of compliance. (Emphasis in original.) 183 It is not entirely clear from the last paragraph of this passage that his Honour has addressed the third way in which ASIC put its case of a contravention of s 674(2) by FMG. It may well be that his Honour treated ASIC's third formulation as subsumed in its first. To the extent that this is how his Honour dealt with this limb of ASIC's case, I would respectfully disagree with that approach. There is, I think, a real difference between the first and third of ASIC's formulations: in the third formulation, ASIC asserts that information that FMG had mis-stated the terms of the framework agreements was information which would, or would be likely to, influence persons who commonly invest in shares in deciding whether to acquire or dispose of shares in FMG. I reject FMG's argument that it is only if the actual notifications made by FMG had a material positive effect on the price of shares in FMG that corrective disclosure was required. The circumstance that FMG's management had mis-stated the terms of the agreements was a circumstance necessarily apt to affect the confidence of investors in the management of the enterprise – and hence influence them to acquire or dispose of FMG shares over and above the influence which the information actually disclosed by FMG may have had. 184 It is to be emphasised that to say 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 then obtained, that information was information which would, or would be likely to, influence investors in deciding whether to acquire or dispose of shares in FMG. The confidence of investors in FMG's management was a matter of an entirely different order of importance than information about the achievement of incremental milestones along the way of bringing the Project from a mere speculation to a reality; see Jubilee Mines NL v Riley (2009) 253 ALR 673 at [153]. 185 The trial judge approached the application of s 674(2)(c) and Listing Rule 3.1 as if the only information of which the directors of FMG were aware was the making of each framework agreement and their opinion as to its meaning and effect (at [246]-[247] and [251]). This approach overlooks the terms of each of the framework agreements. The terms of each of the framework agreements were information in the possession of each of the directors and of which they were aware. 186 As I have noted above, much of the trial judge's discussion of the alleged contraventions of s 674(2) was necessitated by his Honour's view that FMG complied with s 674(2) by stating its genuinely and reasonably held opinion as to the effect of FMG's announcements to the ASX, as well as by ASIC's presentation of an array of possible theories of the contraventions. It is, in my respectful opinion, unnecessary to reiterate or review this discussion. 187 It is not necessary, for example, to enter upon a consideration of the merits of ASIC's contention that a disclosure of erroneous information to the ASX is not only a breach of s 1041H but also a breach of s 674(2). Nor is it necessary to resolve the question whether s 674(2) requires the disclosure of the making of the framework agreements which had effect as agreements to agree. ASIC argues, in one of its formulations of FMG's contravention of s 674(2)(c), that the obligation to disclose is not satisfied by an announcement which is itself misleading or likely to mislead. It is important here to appreciate that there was one contravention of s 674, in relation to each of the framework agreements, albeit one which continued until March, and that was the failure to disclose the terms or the true effect of each of the framework agreements. Purported disclosures may have contravened s 1041H of the Act because they involved the publication of misleading information but inadequate attempts to comply with s 674(2)(c) did not themselves constitute a separate and distinct contravention of s 674(2)(c). 188 There is some force in ASIC's challenge to the trial judge's findings that the true effect of the CREC agreement was immaterial. The terms of s 677 do not invite an inquiry as to whether any change in the price of securities has occurred, much less do they require that one be 95 per cent certain that a price change has been caused by an announcement. The "likely influence" test provided by s 677 of the Act is not a high threshold. The fact that the announcements were made after FMG had called a halt in the trading of its shares would also suggest an acknowledgement on FMG's part that the information was significant for investors' decision-making. That FMG's view was sound might be thought to have been confirmed to some extent by the spurt in trading which occurred after the announcement of 23 August. What happened in the market, in terms of movements in share price, may assist the Court in applying the "likely influence" test. And it is difficult to understand why investors would have been indifferent to the information, the burden of which was that the framework agreement had resolved substantial risk and uncertainty which had previously attended the Project in the market's appreciation. FMG's argument that investors would have been indifferent to information that the August framework agreement did not, in truth, effect the removal of that risk and uncertainty, flirts with the surprising notion that investors would not have taken FMG at its word. This surprising notion lurked only a little below the surface of FMG's argument on this point. As I have said, however, it is not necessary to come to a final conclusion on this point. 189 Once it is accepted that FMG's announcements contravened s 1041H of the Act, FMG, having made misleading statements to the ASX, was obliged by s 674(2) to correct the position. That is because 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 brought about by FMG's misleading statements, there can be no room for any suggestion that the corrective information which FMG was obliged to provide was not material within the meaning of s 677 of the Act. There can be no serious suggestion that FMG was not obliged by s 674(2) to correct the impression created by the misleading statements which FMG made. It would be fanciful to suggest that information showing that FMG had misled the market about having secured binding contracts for the building and finance of the Project would not have influenced common investors in deciding whether to acquire or dispose of FMG's shares. THE CASE AGAINST FORREST 190 As to the nature and extent of Forrest's involvement in the activities of FMG which led to these proceedings, the trial judge found (at [895]): The breadth of managerial powers delegated to the chief executive officer by the board is ultimately contingent on the terms of appointment of the CEO: Harold Holdsworth & Co (Wakefield) Ltd v Caddies [1955] 1 WLR 352 as cited in Randall v Aristocrat Leisure [2004] NSWSC 411 at [382]. There is no evidence to demonstrate that Forrest's powers and authority as Chief Executive Officer were limited in any relevant way. I find that he was intimately and directly involved in the execution of the framework agreements, the formulation of FMG's notifications to the ASX and other disclosures, as well as the ongoing discussions with the NDRC and CMCC seeking Chinese government approval. Likewise, Forrest was intimately and directly involved in discussions with the NDRC and CMCC concerning the NDRC precondition to approval that FMG must provide one or more nominated Chinese companies with minority equity participation in FMG or the Project. 191 Forrest's knowing participation in the relevant events leading to FMG's contravention of s 1041H of the Act established that Forrest was involved in FMG's contraventions of s 1041H within the meaning of s 79(c) of the Act. Forrest knew of the terms of the framework agreements; and it can reasonably be inferred that he knew of the disparity between these terms and FMG's representations about them. He was also a person involved in FMG's contravention of s 674(2)(c) of the Act by virtue of s 674(2A). Accordingly, he contravened s 674(2A) unless he established the defence under s 674(2B) of the Act. 192 Section 674(2B) provides a defence for a person who would otherwise have contravened s 674, provided it can be shown that he or she: (a) took all steps (if any) that were reasonable in the circumstances to ensure that the listed disclosing entity complied with its obligations under subsection (2); and (b) after doing so, believed on reasonable grounds that the listed disclosing entity was complying with its obligations under that subsection. 193 Forrest argues that, even if FMG contravened s 674 of the Act, he was protected by s 674(2B) because there were "reasonable grounds" upon which he had formed the belief that the agreements were binding. There are two difficulties with this argument. First, a person relying on s 674(2B) must, by virtue of subsection (a), show that he or she took all steps that were reasonable to ensure compliance with the entity's disclosure obligations. Forrest was unable to point to any steps he took to ensure that the framework agreements were, in law, binding agreements to the effect represented by FMG. The trial judge was prepared to infer that Huston had provided legal oversight in relation to FMG's dealings since late 2004. Counsel for Forrest argued that it could be inferred that reasonably necessary steps had been taken to ensure that the agreements were binding. But the only available evidence on this point shows that Huston examined the agreements in January 2005, that is to say, well after FMG and Forrest had made the impugned announcements. There is no evidence Huston was consulted by Forrest before this time. There is also no evidence that Forrest consulted with any other adviser other than Huston to seek advice as to whether the agreements he had signed were apt to achieve a binding agreement to build and transfer the infrastructure for the Project. 194 Secondly, ASIC was able to show that Forrest's own communications were inconsistent with a belief on his part that FMG had made a binding agreement for the construction of the infrastructure for the Project. Forrest's own document, his email of 27 October 2004 which is referred to above at [136], shows that he knew that further steps were necessary to reach agreement on the scope, financing, subject matter and price of the Project. This email shows that Forrest knew that FMG was still involved in a bargaining process with the Chinese. At the time when this email was written, 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, and transfer the infrastructure involved. It is also noteworthy that the trial judge did not refer to Forrest's statement at the 23 August press conference that "the price of the railway line…is confidential, but we are pleased to say it is competitive" in evaluating the honesty and reasonableness of Forrest's belief. 195 For these reasons, I am unable to accept that Forrest discharged the onus he bore under s 674(2B) of the Act. The business judgment rule 196 The business judgment rule is stated in s 180(2). It is set out above at [45]. 197 Forrest bore the onus of proving that he made a judgment in good faith and for a proper purpose and that his shareholding in FMG was not a material personal interest in the subject matter of that judgment. The absence of evidence from Forrest makes it difficult to see how Forrest could discharge the onus which he bore to establish these elements of this defence. This difficulty apart, the decision not to disclose the true effect of the agreements cannot be described as "business judgment" at all. A decision not to make accurate disclosure of the terms of a major contract is not a decision related to the "business operations" of the corporation. Rather it is a decision related to compliance with the requirements of the Act. 198 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. Section 180(3) of the Act defines "business judgment" to mean a judgment "to take or not take action in respect of a matter relevant to the business operations of the corporation". In the Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 1998 (para 6.8) it is said that: The operation of the business judgment rule will be confined to cases involving decision making about the ordinary business operations of the company. For example, the decision to undertake a particular kind of business activity promoted in a prospectus would be the kind of business judgment to which the proposed rule may apply. However, compliance (or otherwise) with the prospectus requirements imposed by the Law would not be a decision to which the proposed rule could apply. 199 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. 200 ASIC's charge of a contravention of s 180 of the Act is made out. Conclusion AND ORDERS 201 It is a curiosity of this case that there was no evidence that any member of the investing public was misled by, or suffered loss as a result of FMG's contraventions of the Act. Presumably, that is because those who invested in FMG have profited handsomely from that investment. This circumstance may be said to raise a question as to whether the prosecution of this case by ASIC was a game worth the candle. It is not, however, for this Court to call into question the exercise of ASIC's discretion to determine which cases it should pursue in the discharge of its regulatory functions. 202 In my respectful opinion, ASIC's allegations of misconduct on the part of FMG and Forrest were wrongly rejected by the trial judge. The trial judge erred in characterising FMG's public announcements as statements of opinion which could be justified, in terms of the requirements of s 1041H and s 674 of the Act, on the basis that the opinions were honestly and reasonably held. The terms of the framework agreements did not oblige the Chinese Contractors to build and transfer the infrastructure for the Project. And once FMG has made misleading statements about the terms of the framework agreements, FMG was required by s 674(2)(c) of the Act to correct the position. The appeal should be allowed. The judgment below should be set aside and in its place the following orders made: 1. The appeal be allowed. 2. The orders made on 23 December 2009 be set aside and in lieu thereof: 2.1 The Court declares that the First Respondent has contravened ss 674(2) and 1041H of the Corporations Act 2001 (Cth). 2.2 The Court declares that the Second Respondent has contravened ss 180(1) and 674(2A) of the Corporations Act 2001 (Cth). 2.3 The respondents pay the applicant's costs of and incidental to the proceeding. 3. The matter be remitted to a judge of the Federal Court of Australia. 4. The respondents pay the appellant's costs of the appeal. SCHedule A Notification Documents 1. the 23 August Letter: a letter from FMG to ASX entitled "China Signs to Build Railway" dated 23 August 2004; 2. the 23 August Media Release: a media release entitled "China Signs to Build Fortescue Metals' Multi-User Iron Ore Railway in the Pilbara" dated 23 August 2004; 3. the 5 November Letter: a letter from FMG to ASX entitled "Design, Construct and Finance Agreements for Port, Rail and Processing Plant" dated 5 November 2004; 4. the 5 November Media Release: a media release entitled "China to Fund New $A1.85 billion Australian iron Ore and Infrastructure Project" dated 5 November 2004; 5. the 8 November Letter: letter from FMG to ASX entitled "Additional Information on China Harbour and China Rail Agreements" dated 8 November 2004. Statements 6. Press Conference; a telephone press conference conducted by Forrest with media representatives on 23 August 2004; 7. FMG's 2004 Annual Financial Report which FMG sent to ASX on 27 August 2004; 8. A televised interview with Forrest on the Business Sunday program on or about 17 October 2004; 9. FMG's 2004 Annual Report which FMG sent to the ASX on 25 October 2004; 10. FMG's September 2004 Quarterly Report which FMG sent to the ASX on 29 October 2004; 11. the November Presentation: a copy of PowerPonit slides used in a presentation to potential investors which FMG sent to the ASX on 24 November 2004; 12. FMG's December 2004 Quarterly Report which FMG sent to the ASX on 31 January 2005; 13. the February Presentation: a copy of PowerPoint slides used in a presentation to potential investors which FMG sent to the ASX on 10 February 2005; 14. the RIU Presentation: a presentation made by Forrest on FMG's behalf on 22 February 2005 to attendees at the RIU Explorer's Conference; 15. the Bag of Rusty Nails Presentation (first disclosure): a presentation of PowerPoint slides by Forrest on FMG's behalf on 28 February 2005 to attendees at the AJM Iron Ore & Steel Forecast Conference; 16. the Bag of Rusty Nails Presentation (second disclosure): a copy of the PowerPoint slides presented by Forrest in the first disclosure of the Bag of Rusty Nails Presentation which FMG sent to the ASX on 28 February 2005. I certify that the preceding two hundred and two (202) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Keane. Associate: Dated: 18 February 2011 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 23 of 2010 ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Appellant AND: FORTESCUE METALS GROUP LTD (ACN 002 594 872) First Respondent JOHN ANDREW HENRY FORREST Second Respondent JUDGES: KEANE CJ, EMMETT AND FINKELSTEIN JJ DATE: 18 February 2011 PLACE: PERTH REASONS FOR JUDGMENT EMMETT J: 203 The principal question raised in this appeal is the effect of three agreements entered into by the first respondent, Fortescue Metals Group Ltd (Fortescue), relating to its iron ore project in the Pilbara region of Western Australia (the Project). The agreements concerned the construction of an iron ore mine, a port at Port Hedland in Western Australia for the purpose of loading iron ore onto ships for export, and a railway to carry iron ore from the mine to the port. 204 Fortescue made public announcements to the effect that it had entered into binding build and transfer contracts with Chinese companies for those Chinese companies to build and finance the three components of the Project. The announcements described build and transfer contracts as being contracts under which the contractor designs a facility to the customer's specifications, builds and commissions the facility and then, once agreed performance specifications have been met, transfers the facility to the customer. The announcements in relation to the first agreement, which related to the railway component, asserted that the agreement underwrote the independent railway line for the Project from the Pilbara to Port Hedland and that the Chinese contractor would also source and finance the bulk of the rolling stock for the Project, providing a platform for the rapid advancement of the Project. 205 The appellant, the Australian Securities and Investments Commission (the Commission), contends that to describe the agreements in those terms was misleading or deceptive or likely to mislead or deceive, because none of the agreements imposed upon the relevant contractor an enforceable obligation to build and transfer any component of the Project. Rather, the agreements were no more than agreements to undertake discussions and negotiations with a view to entering into build and transfer agreements of the kind described in the announcements. The Commission says that, as a consequence, Fortescue contravened s 1041H and s 674 of the Corporations Act 2001 (Cth) (the Corporations Act). The Commission also contends that the second respondent, Mr Andrew Forrest, the chief executive officer of Fortescue, was involved in Fortescue's contraventions. 206 The first agreement was signed on 6 August 2004 with China Railway Engineering Corporation (Railway Engineering), and related to the construction of the railway. The second agreement was signed on 1 October 2004 with China Harbour Engineering Company (Group) (Harbour Engineering) and related to the construction of the port. The third agreement was signed on 20 October 2004 with China Metallurgical Construction (Group) Corporation (Metallurgical Construction) and related to the construction of the mine. Each of the agreements was expressed to be a framework agreement. 207 Apart from the description of the parties and the description of the work that might be carried out, the operative provisions of the three agreements were materially identical. The proceeding at first instance and the appeal were conducted on the basis that the effect of each of the second and third agreements was relevantly the same as the first agreement, such that conclusions in relation to the first agreement would be applicable to each of the other two. Accordingly, it is convenient to deal with the terms of the first agreements alone. 208 The Commission's contentions require a detailed examination of the language of the agreement. The Railway Engineering framework agreement recited that: Railway Engineering had 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 involved) for the Project and that Fortescue was relying on that representation. Railway Engineering, having closely examined all proposed documents, had submitted an offer to execute the Works, Fortescue had accepted Railway Engineering's offer and the parties wished to evidence their agreement. Railway Engineering would confer with the Chinese government to determine whether Railway Engineering would also be authorised to carry out works associated with the port and mine infrastructure for the Project. 209 The pivotal provision of the Railway Engineering framework agreement was clause 1.1, which provided that the parties would jointly develop and agree on the following: 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. List of nominated Australian and Chinese joint venture partners and/or subcontractors. Definitive engineering design to Australian standards. Scheduling of the Works. Determination of the Value of Works. 210 Clause 5 of the Railway Engineering framework agreement provided that the agreement was to become binding upon the approval of both the board of directors of Railway Engineering and the board of directors of Fortescue, which had to be given before 31 August 2004. Clause 7 provided that the agreement represented an agreement in itself and that a fuller and more detailed agreement not different in intent, would be developed later. 211 It may be that the Railway Engineering framework agreement imposed legally binding obligations on both Railway Engineering and Fortescue to engage, in good faith, in discussions and negotiations that might ultimately have led to a binding agreement whereby Railway Engineering would be obliged to construct a railway and transfer it to Fortescue for a price that would ultimately be arrived at following those discussions and negotiations. However, the question is whether, even if the Railway Engineering framework agreement imposed such legally binding obligations on both Railway Engineering and Fortescue, it created a binding obligation on Railway Engineering to build and finance the railway as asserted in Fortescue's announcements. 212 While the Railway Engineering framework agreement made clear that the parties intended a binding obligation to be created, albeit that a more detailed agreement was to be entered into, the obligations created by it were to develop and agree on the terms of a build and transfer type of contract. That was the extent of the obligation created. The absence of a clear mechanism for the determination of the detailed specifications for the construction of the railway and the price to be paid by Fortescue for the transfer of the railway demonstrates that the framework agreement was no more than a framework for discussion and negotiation, with a view, ultimately, of reaching a binding agreement for the construction of a railway. There was nothing in the Railway Engineering framework agreement to enable the scope of the work that would be undertaken by Railway Engineering to be determined without further discussion and negotiation; there was nothing that enabled the price to be paid by Fortescue to obtain the transfer of a railway, once constructed, to be determined. It was misleading to describe the Railway Engineering framework agreement as a binding contract to build and finance the railway component of the Project. 213 In the proceeding at first instance, a judge of the Court found that the statements in question were properly to be understood as statements of the opinion of Fortescue or its directors and that the opinions were genuinely held. Accordingly, his Honour concluded that the statements were not misleading or deceptive or likely to mislead or deceive. His Honour therefore dismissed the proceeding brought by the Commission. In the appeal, the Commission contends that the primary judge erred in the conclusions that he reached. 214 The statements in the announcements are not expressed to be statements of the opinion of Fortescue or its directors as to the effect of the Railway Engineering framework agreement. Their effect is to state, unequivocally, that Fortescue has entered into a binding contract with Railway Engineering to build the railway and to transfer it to Fortescue when built. In the absence of some indication that a statement as to the legal effect of an agreement is no more than a subjective opinion of the maker of the statement, such a statement must, as a matter of ordinary English, be construed as a statement as to the agreement's actual legal effect. Unless there is something in the statement to indicate to the reader that the statement represents only the opinion of the maker, there is no reason to read such a qualification into it. 215 I agree with the detailed analysis of the Railway Engineering framework agreement in the reasons of the Chief Justice. An ordinary and reasonable member of the investing public would not understand the announcements as stating the subjective opinion of Fortescue or its directors. An ordinary and reasonable reader of the announcements would understand them to say that a binding agreement has been entered into between Fortescue and Railway Engineering and that that agreement imposed upon Railway Engineering a binding obligation, enforceable by Fortescue, to construct and transfer to Fortescue a railway adequate to serve Fortescue's Pilbara iron ore project. The Railway Engineering framework agreement did not have that effect. Accordingly, the announcements were, at least, likely to mislead or deceive an ordinary and reasonable member of the investing public who read the announcements. I agree that there was a contravention of s 1041H of the Corporations Act. I also agree that there were contraventions of s 674 of the Corporations Act. 216 Clearly enough, Mr Forrest was, for the reasons given by the Chief Justice, knowingly involved in Fortescue's contravention of s 1041H of the Corporations Act and Fortescue's contravention of s 674(2)(c). I agree, for the reasons given by the Chief Justice, that s 674(2B) does not afford Mr Forrest a defence in the circumstances. I also agree with the Chief Justice's conclusion, for the reasons given by him, that the Commission's allegation of contravention of s 180 of the Corporations Act by Mr Forrest is made out. 217 Accordingly, I consider that the Court should make the orders proposed by the Chief Justice. I also agree with the observations of the Chief Justice that the vigour with which the Commission has prosecuted the proceeding against Fortescue is curious. However, I agree that it is not for the Court to call into question the Commission's exercise of its discretion to commence and prosecute the proceeding. The consequences that flow from the conclusion that there has been a contravention will be a matter for determination by a judge of the Court upon remitter. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 18 February 2011 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 23 of 2010 ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Appellant AND: FORTESCUE METALS GROUP LTD (ACN 002 594 872) First Respondent JOHN ANDREW HENRY FORREST Second Respondent JUDGES: KEANE CJ, EMMETT AND FINKELSTEIN JJ DATE: 18 February 2011 PLACE: PERTH FINKELSTEIN J: 218 I agree in the reasons of the Chief Justice and in the orders he proposes. I do, however, wish to make some short observations on two points: agreements to agree and the appropriateness of the Australian Securities and Investments Commission (ASIC) having brought this proceeding. agreements to agree 219 In the presentation of its case ASIC was prepared to assume that each of the so-called "framework agreements" imposed upon the parties an obligation to engage in good faith negotiations to conclude agreements for the construction in the Pilbara of, respectively, a port, a railway line and mines. If that assumption is false (ie if the agreements are not enforceable), then the public statements made by Fortescue (FMG) about the nature of the agreements were even more misleading than would otherwise be the case. The point is that it is one thing to misdescribe the effect of an agreement, but it is quite another to assert that an agreement exists when it does not. 220 It is not strictly necessary to rule on whether the framework agreements created binding obligations for the purposes of resolving whether FMG and Forest breached the Corporations Act 2001 (Cth). It is, however, helpful to consider this issue because the case will go back to a judge to deal with the consequences of the contraventions which the Chief Justice in his reasons has identified. 221 The question whether a binding contract has been made is usually determined by the intent of the parties. In analysing that intent many matters may be taken into account, including the circumstances surrounding the negotiations and the language and terms of what purports to be the agreement between them. In cases where the parties have entered into some arrangement which contemplates the execution of a formal agreement, the analysis is that mandated by the High Court in Masters v Cameron (1954) 91 CLR 353. 222 This case does not raise a Masters v Cameron problem. Here the parties, in clear and unambiguous language, have indicated that each framework agreement was intended to be binding. For example, in the CREC framework agreement, cl 5 states: "This agreement will become binding upon the approval of both the Board of Directors of CREC and the Board of Directors of FMG". Clause 7 states: "This document represents an agreement in itself". Identical clauses are found in the CHEC and MCC framework agreements. But simply because parties intend what they have agreed to be binding does not always produce that result. Although the principle of freedom of contract rests on the premise that individuals are free to make agreements as they wish, the public interest in freedom of contract can be outweighed by other public policy considerations. So, for example, courts will not enforce an agreement to do an illegal act. Nor will they enforce an agreement which is in restraint of trade. Other examples can be brought to mind. 223 In this case the problem is of a different order: If an arrangement is incomplete it may be impossible to find that a contract has come into existence notwithstanding the intention of the parties. For a contract to be valid the agreement must be sufficiently definite and explicit so that the parties' intention can be ascertained with a reasonable degree of certainty. Put another way, a court cannot enforce a contract unless it can determine what the contract is, applying all applicable rules of formation and interpretation. Otherwise the court would be imposing its own perception of what the bargain is rather than implementing what has been agreed by the parties. 224 Often the problem of incompleteness arises when the parties have left an aspect of their bargain for later agreement. In recent years some court have, by a process of implication by law, supplied a term requiring parties to a commercial contract to exercise "good faith" in the performance of their contractual rights and obligations. And there are cases which hold that when parties to a commercial contract have reached a preliminary agreement but have left a term of their contract open for future negotiation the parties are under an obligation to negotiate the open issues in good faith in an attempt to reach agreement on the open terms. This obligation does not mean that a final agreement will be reached. Good faith negotiations will not necessarily bridge all gaps that stand in the way of a concluded agreement. The obligation does, however, bar a party from walking away from the preliminary agreement without a legitimate attempt at negotiation. 225 Imposing an obligation (whether expressly or by implication) to negotiate open terms will not overcome all cases of incompleteness. It will not, for example, deal with the problem created where parties have not agreed on the important (some might say the essential) terms of their bargain. A good faith obligation to negotiate cannot make a fatally incomplete contract valid and enforceable. 226 This case is a good example. The projects contemplated by the agreements were, on any view, complex multi-million dollar projects. The construction of port facilities would likely cost in excess of $1 billion. The construction of a railway line would cost around $1 billion. The construction of mines would cost several hundreds of millions of dollars. Yet almost nothing was agreed about the nature and extent of those projects. One would expect that it would require significant time, effort and expertise to resolve these matters and arrive at the appropriate terms. 227 One missing element of each agreement is the price to be paid for the works. In construction contracts the price is of fundamental importance. If it is not agreed, or there is no agreed method of ascertaining it, there can be no bargain. 228 The reason no price was agreed is the inevitable consequence of another major omission: the scope of the works were barely described, let alone defined. One agreement contemplates the construction of a railway line which would likely be several hundred kilometres in length. But the parties had not turned their mind to its type, design, or even the route over which the line would run. Each difference would carry a different cost structure. Another agreement contemplates the construction of a port. Yet there is no specification of the precise location, size or configuration of the port. Once again the cost differences for the various possibilities would be significant. Then there is the agreement for the construction of the mines. How many mines, of what type and where were they to be located? None of these issues had been worked out. 229 In a complex case such as this it would, in any event, be necessary to impose additional terms to make effective a duty to negotiate in good faith the scope of the works. For good faith negotiations on any of the open issues to take place the other obligations that would need to be imposed would include, by way of example, (1) a duty on each party to disclose information material to the other party's ability to formulate terms; (2) the establishment of a framework for the negotiations; and (3) a duty to continue negotiations for a sufficient time. No doubt other terms would be necessary. So many terms would need to be implied that the result would be an agreement imposed by the court, not one reached by the consensus of the parties. The prosecution of the claims 230 The Chief Justice and Emmett J have made some observations about the appropriateness of ASIC running this case. I have a very different view from them. 231 The facts and figures (using data from the Commsec website to supplement that which was in the appeal papers) upon which my views are based are as follows: 1. On 1 July 2004 the share price opened at $0.50. 2. During the month prior to the first announcement (19 July 2004 to 18 August 2004) FMG shares traded between $0.44 and $0.60 with an average price of approximately $0.52. 3. In that period the volume of trade in FMG shares was between 10,234 and 1,644,698 shares per day, averaging approximately 284,000 shares per day. 4. The day of the trading halt for the first announcement (19 August 2004) FMG shares closed at $0.55. 5. The day trading resumed (23 August 2004) FMG shares opened at $0.65, reached a high of $0.70 and a low of $0.57 before closing at $0.59. 2,569,182 shares were traded. 6. During the month following the resumption of trading (24 August 2004 to 23 September 2004) the share price fluctuated between $0.54 and $0.65 with an average of approximately $0.59. 7. In that period the volume of trade in FMG shares was between 10,905 and 2,161,515 per day, averaging approximately 342,000 shares per day. 8. During the month prior to the second announcement (5 October 2004 to 4 November 2004), the share price fluctuated between $0.57 and $1.65 with a significant upward trend throughout the month. 9. In that period the volume of shares traded was between 304,815 and 3,677,233 per day, averaging approximately 1,422,000 shares per day. 10. The day of the trading halt for the second announcement (5 November 2004) FMG shares closed at $1.66. 11. The day trading resumed (9 November 2004) the share price opened at $2.01, reached a high of $2.32 and a low of $1.93 and closed at $2.25. 8,329,775 shares were traded. 12. During the month following the resumption of trading (10 November 2004 to 9 December 2004) the share price fluctuated between $2.27 and $3.33, averaging approximately $2.90. 13. In that period the volume of shares traded fluctuated between 307,794 and 10,219,968 per day with an average of approximately 2,250,000 shares per day. 14. Over the following two months (10 December 2004 to 9 February 2005) the share price continued to rise, reaching a high of $3.95. 15. During the month prior to the publication of the AFR article (22 February 2005 to 23 March 2005), the share price fluctuated between $4.29 and $5.55 with a significant upward trend throughout the month. 16. In that period the volume of shares traded per day was between 111,790 and 1,889,346, averaging approximately 553,000 shares per day. 17. The day prior to the publication of the AFR article (23 March 2005) the shares closed at $5.05. 18. The day of the article (24 March 2005) the share price opened at a high of $4.25, reached a low of $3.30 and closed at $3.77. 1,165,806 shares were traded. 19. Over the next three trading days (29 to 31 March 2005) the share price hit a low of $2.83. 8,257,166 shares were traded over those three days. 20. During the following month (1 April 2005 to 29 April 2005) the share price fluctuated between $2.29 and $3.93, averaging approximately $3.12. 21. In that period the volume of shares traded fluctuated between 257,894 and 1,900,463 per day, averaging approximately 815,329 per day. 22. During the following two months (2 May 2005 to 1 July 2005) the share price fluctuated between $2.25 and $3.25, with an average of approximately $2.75. 23. In that period the volume of shares traded fluctuated between 14,112 and 1,128,478, averaging approximately 308,000 per day. 24. On 30 June 2005 the share price closed at $2.90. 25. FMG's share price only reached its pre-AFR article high on 22 December 2005, almost nine months after the article was published. 232 The first point to make is that one of the important objectives of Chapter 6CA (where s 674 is to be found) is to ensure that there is a fully informed and therefore efficient market for listed securities. The second point is that during the period 23 August 2004 to end March 2005, those trading in FMG securities had been seriously misinformed about the affairs of the company. The third point is that, while there is no evidence of complaint having been made that a share trader had suffered loss, the only open inference is that traders did lose money and possibly significant sums of money. The only circumstance in which it could be said that no loss was suffered by anyone is where every single trader who purchased FMG shares after the second announcement held onto them in spite of the falling price until the price recovered to their purchase price. For many investors would have been as late as 22 December 2005. This is a highly unrealistic assumption: more likely than not, many traders lost money and substantial sums of money at that. 233 In any event, while I think that many shareholders suffered significant losses, I regard that as not being determinative of whether the action should have been commenced. But assuming for a moment that no shareholder lost money, if the market was materially misled, it can hardly be right that a prosecution not commence because, by reason of serendipity, shareholders made a gain. If that were the approach, the continuance disclosure obligations could be sidestepped by any successful corporation whose share price continued to climb after investors discovered that the corporation mislead the market. That is not what Parliament had in mind. 234 Looking specifically at Mr Forrest's position, the relevant facts are these. Mr Forrest has (through various entities) always been a substantial shareholder in FMG. As at 1 July 2004 he held over 40 million shares. As at 30 June 2005 his shareholding had increased to over 100 million shares. During the relevant financial year he sold over 5 million shares. If the sales were of any of his original holding and were made after the announcements, Mr Forrest would have made a significant profit. (The maximum he could have made was over $25 million, representing over a 1100% increase in the value of his shares, although it is likely he made less) Further, the value of his original 40 million shares increased by up to 1300%, (ie over $200 million) after the November announcement. At the same time, the increase in FMG's share price would have significantly increased its ability to raise finance, find significant equity investors and negotiate contracts for iron ore. 235 No doubt the judge who imposes penalties will investigate these matters in more detail and on proper evidence. Nonetheless I mention them to indicate why I believe that not only was it was proper for ASIC to have commenced this action but it would have been subject to just criticism had it failed to do so. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. Associate: Dated: 18 February 2011