At Forum Law we know that it's vital to stay up to date with the latest legal developments that are relevant to your industry, workplace or personal circumstances. In our Forum Law News we describe some of the recent cases that may be of interest, and link to the full outlines of the cases and how their decisions affect the relevant laws, on our website.

A long and hard-won battle for "Twiggy" Forrest against ASIC

Forrest v Australian Securities and Investments Commission [2012] HCA 39

The High Court considered a prosecution brought by ASIC against high-profile miner Fortescue Metals Group Ltd and its chairman and chief executive, John "Twiggy" Forrest.

ASIC prosecuted the company and Forrest for alleged contraventions of the Corporations Act 2001 in connection with information provided to the ASX regarding the proposed Pilbara Iron Ore and Infrastructure Project. It was ASIC’s case that, in contravention of s1041H of the Act, the company engaged in misleading and deceptive conduct in publishing information that might deceive or mislead purchasers of a financial product (in this case, shares in Fortescue Metals). ASIC also claimed that Fortescue had contravened the continuous disclosure requirements of s674 of the Act, and that each breach of the Act by the company also involved a breach by Mr. Forrest of his directors’ duty of care and diligence under s180(1) of the Act.

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Small and medium corporations dominate insolvency reports

During the 2011–2012 financial year, reports lodged with the Australian Securities and Investments Commission have indicated that small to medium corporations remain the most likely to go insolvent. Most of the companies that went insolvent during the last financial year had assets of $100,000 or less and many had less than 20 employees.

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The Court ruling terms of settlement to be too harsh

In practice, where prosecutions brought by ASIC for breaches of the Corporations Act and other legislation are settled between the parties, the court will generally approve the settlement at ASIC’s request and make the orders agreed between the parties. However, this will not always be so, as was demonstrated in the recent decision of Robson J in the Supreme Court of Victoria in ASIC v Ingleby [2012] VSC 339.

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Payment claim entitlements of contractors

In Edelbrand Pty Ltd v HM Australia Holdings Pty Ltd [2012], the NSW Court of Appeal held that payment claims under the Building and Construction Industry Security of Payment Act could validly be submitted and relied upon in the following circumstances:

• Where the contractor submitting the payment claim is contracted only to manage construction work and to oversee the administration of the job; and
• Where the contract provides that payment of the contractor will include a bonus or a “share of saving” payment calculated on a percentage basis where the job is brought in under budget.

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Strata owners claiming for defective works

Claims for defective building works brought by strata owners corporations against builders and developers of strata complexes may be brought either pursuant to the statutory warranties under the Home Building Act 1989 Part 2C, or by way of common law negligence claims. This is to be distinguished from the Home Owners Warranty Insurance which is not required to be provided for residential buildings over 3 storeys and 2 or more dwellings.

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Registering your security interests

The PPSA requires diligence in registering your security interests when claiming an interest in property from an administrator

In previous issues we have kept you up to date with the progress of the introduction of the Personal Property Securities Act 2009 (Cth). Recently, the Federal Court had the opportunity to consider the application of the new legislation in a case where directions were sought by administrators as to the sale of potentially encumbered assets.

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The role of misleading conduct in corporate collapse

Wingecarribee Shire Council v Lehman Brothers Australia Ltd (In Liq)

This recent Federal Court case saw a ruling that Grange Securities Ltd, acquired by Lehman Bros Holdings Inc. in 2007, was liable to compensate three councils for losses that resulted from investments in Grange’s Synthetic Collaterised Debt Obligations (SCDOs). These highly complex financial products posed high risks that justified the high interest rates offered. Essentially they bet on whether or not certain credit events would take place within the period of investment. Where these credit events did take place the capital provided by the investor would be lost.

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If you would like to discuss any of these issues or if you require any legal advice or assistance please contact us at Forum Law on +61 2 9560 3388 or email us.