Case: Australian Securities &amp; Investments Commission v Narain [2008] FCAFC 120 ; (2008) 169 FCR 211
Outcome: referred to
effect of the amendments was to expand the scope of s 1041H beyond dealing in securities to any misleading and deceptive conduct in relation to a financial product or financial services. The Full Federal Court has recognised that the scope of the operation of s 1041H is very wide: Australian Securities and Investments Commission v Narain [2008] FCAFC 120 ; (2008) 169 FCR 211. Special leave to appeal to the High Court was refused: Narain v Australian Securities and Investments Commission [2008] HCATrans 408 per Crennan and Kiefel JJ. Section 1041H: general principles He submits that the words "in relation to" signify the need for there to be some relationship or correlation between FMG's conduct and its shares: ASIC v Narain [2008] FCAFC 120 ; 169 FCR 211 per Jacobson and Gordon JJ at [69] and [74]. There the respondent was the managing director of Citrofresh International Ltd (CTF). The respondent was involved in the writing of an "ASX Release" which claimed that CTF's products could reduce the spread of four major viruses including HIV/AIDS. The respondent instructed CTF's secretary to send the statement to the Australian Stock Exchange who published it. The statement affected the price of CTF shares. It was held at first instance that the ASX Release did not contain representations "in relation to" CTF's shares pursuant to s 1041H of the Act because the statement did not refer to shares on the face of it, or deal with the shares directly. This construction was rejected by the Full Court which held that the phase "in relation to" in s 1041H of the Act only requires an indirect or less than substantial connection between the misleading conduct or statement and the financial product and that it is not necessary for a statement to expressly refer to the shares or to deal with the shares on its face. In deciding that the respondent engaged in conduct in relation to a financial product, CTF's shares, by publishing the statement on the ASX, Finkelstein J held that there was a sufficient connection between the statement and CTF's shares by reason of (1) the content of the statements, which concerned the business of CTF; and (2) the place of their publication, namely on the the exchange where the shares were traded. Jacobson and Gordon JJ said the concept of misleading and deceptive conduct is one which embraces all of the circumstances in which the conduct takes place, and that the relevant conduct was not merely the text of the announcement. Their Honours said the statement was an announcement made to the ASX about a "landmark" test result for the company's products and was disclosure to the market. Forrest submits that the Court's ratio in Narain was that CTF's representations contained in announcements made to the ASX were "in relation to a financial product" because the representations were published where shares were traded. I do not think this was what their Honour's intended although the announcement in that case was made to the ASX. For Finkelstein J, the publication on the ASX was just one of two factors giving rise to the connection between the statement and the relevant financial product. The RIU Explorers Conference brochure discloses that it was attended by representatives of a considerable number of mining companies. It appears to have been a professional conference. The RIU Presentation was not sent to the ASX. I am however not persuaded, for lack of evidence as to the attendees, that the RIU Presentation at the RIU Explorers Conference meets the statutory description as construed in ASIC v Narain [2008] FCAFC 120 ; 169 FCR 211 . There is no precise evidence as to who attended the AJM Iron Ore and Steel Forecast where the Bag of Rusty Nails Presentation was given. I have described this as the "first disclosure". However, Kirchlechner had attended this conference for a number of years and he said that typically, amongst others, there were brokers who attended. I take him to be referring to stock brokers. A copy of the PowerPoint slides used in the presentation was sent to the ASX. I have described this as the "second disclosure". These contain information amongst other things as to the source of FMG's funding for the Project including $630m from "China Rail"; $571m from "China Harbour"and $306m from "China Metallurgical". These are references to CREC, CHEC and CMCC. The amounts are said to be "under agreement". I accept that this conveys the impression of binding agreements between FMG and each of those companies. This information lies in the context of public knowledge of the fact of the execution of these three agreements as binding agreements. They therefore constitute, in effect, a re-publication of that information to the market and therefore is conduct in relation to a financial product. I am satisfied that the first and second disclosures constituted conduct by FMG in relation to a financial product. General principles in relation to s 52 are applicable