Chief Executive Officer Of Fortescue

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Chief Executive Officer Of Fortescue

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Chief Executive Officer Of Fortescue

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Question:

What Is The Work Is Chief Executive Officer Of Fortescue?

Answer:
Introducation

The chief executive officer of Fortescue Metals Group Ltd who is known as Mr. Forrest was declared some information on behalf of the company to the Australia securities exchange. This action amounted to a representation that was aiming at the current investors and other willing investors (Forrest v ASIC, 2011). It bears noting that the information that was passed by the director Mr. Forrest was sourced from a document which had the company seal of Fortescue Metals Group Ltd. Fortescue Metals Group Ltd had been given the exclusive sanction to engage in mining activities in Western Australia. However, so that they could find good use of the iron ore it was imperative that they construct a railway line which was purposed to transport the iron ore minerals being mined to Port Hedland where a port would be constructed. Fortescue Metals Group Ltd made three different contracts with Chinese companies for the railway construction.
Mr. Forrest wrote a letter which gave a clear detail of the contents of the agreement that was made between Fortescue Metals Group Ltd and China Railway Engineering Corporation (CREC) which is among the companies that was expected to construct the railway to Port Hedland (Australian Securities and Investments Commission v Fortescue Metals Group Ltd, 2011). Mr Forrest proceed to make a statement to the media explaining that the agreement that Fortescue Metals Group Ltd entered with China Railway Engineering Corporation (CREC) was binding in the two parties and a certain price was made with China Railway Engineering Corporation agreeing that it will suffer any risk thereafter. The information that Mr. Forrest explained to the media did not give the complete details of the agreement. During the media briefing Mr. Forrest made acclamations that the price was competitive although he did not give sufficient details to explain the price details of the agreement suggesting that it was confident information. While performing its duty mandated by the law, the Australian Securities and Investments Commission’s main allegation was founded on section 1041H of the Act, which stated that the director of FMG was in breach of that provision by giving information that amounted to misleading and deceptive conduct (Corporations Act 2001). The allegation that was made by the Australian Securities and Investments Commission is that Mr. Forrest had breached the duties of a director envisaged in Sec 180(1) of the Corporations Act 2001.

Director Duties Breached
A director has a duty under the common law and statutory through section 180(1) to act with due diligence and care as they carry put their mandate in a company (ASIC v MacDonald, 2009). The duty to exercise due diligence is also expected from an officer of the company officer who is involved in the management activities of the company such as decision making. Conversely, the director has a duty to ensure that all his actions are anchored on the idea that the best interest of the company is always the priority of all actions and any action must be made for the sole benefit of the company (Lagunas Nitrate Co v Lagunas Syndicate, 1899). When acting for the company it is the duty of the director to exercise reasonable skill and care. It is instructive to note that the corporations act has given a director a duty not to take part in misleading or deceptive conduct (Corporations Act 2001 s1041H (1)). The duty of a director not mislead or deceive has also been envisaged under section 12DA (1) of the Australian Securities and Investments Commission Act 2001 gives the commission power to bring an action and prosecute any director that is found culpable of misleading and deceiving conduct. The duties of a director under Australia Law serve to vigilantly safeguard the interest of the shareholders in the company.
It is imperative to note that an action for misleading and deceptive conduct will succeed if the representations of the director had a negative effect on the target audience causing loss or damage (Taco Bell of Australia Inc. v Taco Bell Pty Ltd, 1928). It is not sufficient to prove misleading and deceptive conduct if the targeted audience merely made fanciful inferences that could not have emanated from the alleged misleading and deceptive conduct (AstraZeneca v GSK, 2006). It is interesting to note that in the case of Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (2010) held that a director will still be held to have breached the duty not to mislead or deceive in trade or commerce despite the fact that the audience did not respond to the representation or they did not suffer any harm.

Arguments: Reason for Breach
The submission by the various parties in this tried to show whether there was a breach of any of the director duties under the corporations act especially whether Forrest exercised the duty of care and due diligence which is ordinarily to be done by a reasonable being during similar corporate position, by making the announcements concerning the company. At the proceeding, the main ground of claim made by Australian Securities & Investments Commission (ASIC) against the Fortescue Metals Group Ltd (FMG) was that the company and the director Mr. Forrest acted in contravention of section 1041H of the Corporations Act by engaging in misleading and deceptive conduct. The Australian Securities & Investments Commission further argued that their misleading and deceptive engagement amounted to a breach of the legal duties of a director running a company in Australia. The agreement that Mr. Forrest purportedly declared was a binding agreement between Fortescue Metals Group Ltd (FMG) and the China Railway Engineering Corporation (CREC) was misleading and deceiving the investors. The ASIC also argued that the statement that CREC would undertake to construct the railway by giving the appropriate finance for the construction and that the agreement was made in writing and signed between the two parties was misrepresentation. In fact ASIC averred before court that the preceding statement was not even included as a term in the written agreement purportedly insinuated by Forrest the director. Further, ASIC also pasted that CREC was not even contracted to construct railway because there was no any enforceable contract recognized in law passing to them a contractual obligation.
On the other hand, ASIC argued that the statement that was made by Forrest which has the supposition that there was a binding and enforceable contract between his company where he held the capacity of a director and CREC was not a true assertion and Mr. Forrest was liable for misleading and deceptive conduct under the Corporation Act 2001. The misrepresentation made by Mr. Forrest was purposed to deceive and mislead the investors by creating an abstract notion that there were contractual obligation between the two parties. On the contrary there was a considerable amount of evidence that FMG and Mr. Forrest failed to discredit because any attempt to prove that the assertion were actually statement of fact would make them not be liable for breach of duty. Although it is blatant that the intention of the party making a misleading and deceptive statement cannot be used as a test for determining whether the director breach the duty, it suffices to say that Mr. Forrest section was premised on an factual intention to deceive and mislead. The ASIC in fact persuaded the court that assertions proclaimed by Mr. Forrest were mere statement of opinion which easily attracts the liability of misleading and deceptive action.

Reason for Judgment
The issue that presented to the court was mainly a determination of if there was a breach of s 1041H of the Corporations Act which amounts to a misleading and deceptive conduct. The defendants in the case were Mr. Forrest who was alleged to have breached his duties as a director of a company. The other claim that was presented to the court was whether the conduct that Mr. Forrest engaged in through making false representations with intent to deceive and mislead the investors of the company. They also had to establish the truth behind the assertion made by Mr. Forrest that there was an agreement and it was binding upon the two parties. The court was also put to task to establish whether the representation made by Mr. Forrest amounted to a fact or an opinion. The court also sought to determine through application of legal tests whether a reasonable person who was having a similar position as Mr. Forrest would have acted in the same way he did. It bears noting that the judges has reason to believe, on a balance of the legal and academic opinions, that the representations made by Mr. Forrest could be regarded as a statement of opinion and therefore they were misleading and deceptive. The majority of the judges however noted that whether the representations represented a fact or an opinion was a trivial matter that should not affect the decision of the court but the cardinal duty of the court was to safeguard the interest of current investors and potential investors. The unanimous view was that the sole duty of the judges was explain if section 1041H of the Corporations Act has actually been contravened by the director and intention of the director was not a issue for determination of the court since it was not necessary to evince liability. The agreed decision by the entire court was that Forrest was not liable breach of his duties that have ben placed on him according to the law. According to the court the proclamations made by Forrest that the there was a legal agreement entered to by CREC and FMG was not misleading and deceptive. This is premised on the fact that Forrest made the assertions in good faith and reasonable people could not believe that the information that he passed was false. The decision was surprising because the evidence adduced by ASIC was persuasive and convincing but the decisions of the court carried the day.

Conclusion
The duties f a director that formed the flesh of this study is the duty not to give misleading and deceptive information, duty of care and due diligence and duty to act in the best interest of the company. The high court, however, majorly concentrated on the duty to avoid misleading and deceptive practice. It bears noting that these duties have been envisaged under section 180 of the corporation act 2001. The statutory law and common law in Australia has created a created great significance in the duties of the director. He is expected to practice his fiduciary duties and act in the best interest of the company activities and not to satisfy his own selfish interest. The director should also be competent in his duties. The high court in Forrest case although they ruled in favor of FMG and the director insisted on the importance of the duties of a director. It can be conceded that examining the inference underlying the response of the target audience to the misleading representations is entirely a question of fact. Accordingly, it has ben held in the case of ACCC v Telstra (2004) that when proving whether a director gave a misleading or a deceptive information, it is vital to examine the knowledge of the audience that was being targeted and whether they mere merely made a wrong assumption. In the end although the sanctions on the director duties are clear in the corporations act and other enabling legislations the burden of proofing such cases is still left on a balance of probability and this satisfies the conclusion that was arrived at by the court that there was no any breach of the director duties. On whether the audience of the message which were the investors were actually deceived the court held that it would not matter there response but a reasonable person will reasonable believe the representations made by Forrest to be true.

Reference
ACCC v Telstra (2004) 208 ALR 459
ASIC v Macdonald (No 11) [2009] NSWSC 287
AstraZeneca v GSK [2006] ATPR
Australian Securities and Investments Commission v Fortescue Metals Group Ltd (2011) 190 FCR 364, 375 [23]
Australian Competi-tion and Consumer Commission v Singtel Optus Pty Ltd [No 3](2010) 276 ALR 102
Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act)
Australian Securities and Investments Commission v Fortescue Metals Group Ltd [No 5] (2009) 264 ALR
Corporations Act 2001 (Cth)
Forrest v ASIC (2014) 276 ALR 102
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82
Lagunas Nitrate Co v Lagunas Syndicate [1899] 2 Ch. 392
Taco Bell Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177,

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