BRENDAN TREMBATH: But first, the corporate watchdog has suffered yet another humiliating legal defeat. The Federal Court today dismissed legal action by the Australian Securities and Investments Commission against the mining magnate Andrew Forrest and his company, Fortescue Metals.
Justice John Gilmour was highly critical of ASIC's conduct. He found there was no basis for its claim Andrew Forrest and Fortescue knowingly issued misleading statements to the Stock Exchange. And he attacked ASIC for making public allegations of deliberate dishonesty against Mr Forrest and his fellow board members without foundation.
Economics and finance correspondent Stephen Long joins me with more on the story. Stephen Long, this seems to be the latest in a series of judgements highly critical of the regulator.
STEPHEN LONG: Brendan, in the space of a few weeks, ASIC has had a number of judgements that have raised serious issues about the way it runs litigation. Beginning in mid-November with the One.Tel case where the judge found that the evidence, the witnesses and the conduct of the case by ASIC all failed to meet the bar; was highly critical and dismissed all claims against Jodie rich and One.Tel.
Then we had the Australia Wheat Board matter involving Andrew Lindbergh where the judge was again highly critical and now we have this case where once again we have a federal court justice raising serious issues about the conduct of litigation by the Australian Securities and Investments Commission and dismissing its case and it will face serious cost orders in this running in the many millions of dollars on top of the $30 million it's estimated it would have to pay out on the One.Tel matter.
BRENDAN TREMBATH: Give us a sense of how strong the judge was in his language.
STEPHEN LONG: He was very, very critical. He said that allegations by ASIC against directors are self-evidently serious and took issue with the fact that ASIC had raised issue of deliberate dishonesty on the part of Andrew Forrest, the chairman and chief executive of Fortescue, and other board members.
He said that those allegations carried considerable weight and will often, as in this case, attract widespread media coverage and they tend to adversely affect the reputations of those they're levelled against and that directors have to live in the shadow of those allegations, sometimes for years. So it's important that the allegations only be made when there is reasonable evidentiary basis for them and ASIC had no such evidentiary basis for making those allegations.
He also found that ASIC said in its case that Andrew Forrest and Fortescue had sought no legal advice before they had issued statements to the Stock Exchange in 2004 saying that they had binding, legally binding agreements with Chinese companies when in fact Mr Forrest and the company did have legal advice from a senior commercial litigator in Perth, one Peter Houston, who was in the words of the judge, "A very experienced and competent commercial solicitor" and they were entitled it their opinion that those agreements were legally binding.
So once again they are serious question marks about the conduct of the case, the evidence by ASIC and they've been roundly slammed by the judge.
BRENDAN TREMBATH: And Stephen Long, just take us back to how it got started in the first place.
STEPHEN LONG: The company Fortescue Metals was looking to expand its operations and try and rival Rio Tinto and BHP, the giants in the industry, and it entered agreements with three Chinese companies to build infrastructure, namely ports, mines and a railway.
Now, as it turned out, the agreements weren't as watertight was Andrew Forrest and Fortescue apparently believed. But the point is the judge says they had a reasonable basis for holding that opinion at the time.
BRENDAN TREMBATH: And Stephen, what's been the response from the company and the regulator?
STEPHEN LONG: Well, Mr Forrest is very, very pleased, although he's not actually prepared to give an interview. We did seek an interview. We've had nothing at this stage from the regulator and Mr D'Aloisio, who heads ASIC, is not willing to give an interview. You can understand that this didn't happen on his watch in the sense that the litigation was launched before he took over. But he must be wondering what's going on, what happened under the previous chairman, and how he can restore ASIC's reputation.
BRENDAN TREMBATH: Stephen Long.
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