Announcements on the ASX – A note for Directors

Justice Jackman of the Federal Court of Australia delivered his Honour’s decision today in Australian Securities and Investments Commission v Terracom Limited [2025] FCA 726 (Terracom).

The decision concerned an application brought by ASIC against TerraCom Limited (Company) and its directors alleging that the relevant directors each contravened:

(a) section 1309 (2) of the Corporations Act 2001 (Act) by authorising the giving of information to the Australian Securities Exchange (ASX) in the form of market announcements relating to certain allegations made by a former employee of the Company (Mr Williams), and the processes for certification and sale of the Company’s coal, that were false or misleading; and

(b) section 180 of the Act by failing to act with the requisite degree of care and diligence in the circumstances of an investigation into Mr Williams’ allegations, and the associated release or publication of the allegedly misleading announcements.

Although the Court ultimately dismissed ASIC’s application against the relevant directors and made findings that ASIC’s application lacked merit in various respects, the Court’s discussion of the salient provisions of the Act highlight some important considerations for the directors of public companies.

Background in Terracom

Terracom is a public company, whose primary business involves the production of thermal Coal. Through a wholly owned subsidiary, the Company owned and operated the Blair Athol coal mine (Mine) in Queensland at all times material to ASIC’s application.

The Company’s subsidiary sold coal to (amongst other purchasers) Noble Resources International Pty Ltd (Noble). Noble then on sold the coal from the Mine to Noble’s customers.

The substance of Mr Williams’ allegations against the Company included that:

(a) the Company colluded with ALS (the Company’s independent laboratory appointed in relation to the majority of shipment from the Mine between May 2018 and January 2020) to overstate the quality of coal, and specifically the Net Calorific Value (NCV) recorded on the Company’s invoices and certificates of analysis produced by ALS, relating to a significant number of coal shipments from the Mine;

(b) one of the Company’s directors, Mr McCarthy, was aware of the overstatement of quality and had instructed Mr Williams to continue this practice;

(c) the “fraudulent” overstatement of coal quality was partly concealed through the use of a sub-agent by Noble for the payment of bribes to conceal the purported overstatement of which the Company was aware;

(together, the “Allegations”).

During the course of litigation commenced by Mr Williams against the Company and the relevant directors under the Fair Work Act 2009 (Cth), the Company made the following public disclosures in respect of the Allegations:

(a) an announcement to the ASX on 24 February 2020 (see [43] of the decision for the content of the announcement), which responded to an article published by the Australian Financial Review (AFR) which discussed the Allegations and denied the same;

(b) following the ASX’s rejection of a proposed announcement to the ASX on 10 March 2020, an “open” letter to the Company’s shareholders was published under cover of an AFR article published on 12 March 2020;

(c) an announcement to the ASX on 3 April 2020 (see [64 of the decision for the content of the announcement), updating the market on the status of Mr Williams’ litigation against the Company (and its directors), and explaining various procedures applied by the Company to ensure the coal it supplies is quality tested and monitored and crucially, that none of its customers  had raised any concerns about the quality of coal from the Mine (April Announcement).

The Court’s Decision

In pleading its case, ASIC did not allege that the statements in the ASX announcements were themselves false or misleading, but rather that ASIC had constructed from the statements in the announcements some alleged representations that ASIC alleged were false or misleading within the meaning of s 1309 (2) of the Act.

The Court only found that two of the representations alleged by ASIC had been made out, which both related to the April Announcement. The Court, however, found that those representations were not false and misleading (see [104] of the decision).

The Court also ultimately dismissed ASIC’s allegations against the Company’s directors in respect of any contraventions of s 180 of the Act.

After considering a variety of evidence, including an investigative accounting report prepared by PWC, and a report of the Company’s auditors (EY), the Court dismissed ASIC’s application and opined that there was a “realistic possibility” of the directors obtaining special costs orders against ASIC in consequence of the Court’s emphatic dismissal of the application.

Matters to Consider – Announcements to the Market

Notwithstanding the Court’s resolute dismissal of ASIC’s claims, the Court did accept the existence of authority that may support the possibility that s 1309 (2) may be contravened, on the basis of a representation that is implied from the content of a statement made to the market. That is, false and misleading representations can be made by way of information that is derived from express statements and need not necessarily be in the content of the express statements themselves.

The upshot is that directors of public companies should be swift to obtain advice to ensure:

(a) the accuracy of disclosures, either by way of media releases, disclosures to the general media or proposed ASX announcements) made to the market;

(b) directors are conservative in addressing the related need to avoid false or misleading impressions being made to the market, noting that even if a statement is literally true, it may yet create a false and misleading representation to investors as to a particular matter relevant to the company;

(c) directors are especially vigilant in relation to the accuracy of a public company’s disclosures during the pendency of an investigation into the affairs and management of the relevant company; and

(d) directors are complying with the duties they owe to the company and its shareholders pursuant to sections 180 to 184 of the Act, when communicating with the market.

MPH Lawyers advises and assists a range of ASX-listed entities and can provide advice on short notice in relation to any pending announcements to the ASX, or generally on matters of corporate governance and compliance.

Please feel free to contact us on (08) 9221 0033 to speak to one of our front end corporate or corporate disputes directors.