By Sean Smith
A Federal Court judge has dealt the corporate regulator a major defeat, clearing one-time construction heavyweight Wal King and other former and current directors of coal company Terracom of allegations they misled investors.
Handing down his decision on Friday, Justice Ian Jackman criticised parts of the civil case argued by the Australian Securities and Investments Commission as 鈥減lainly untenable鈥 and 鈥渦nworthy鈥.
The ASIC lawsuit alleged Mr King, the listed Terracom鈥檚 former chair, former director Craig Ransley, former chief financial officer Nathan Boom and current chief executive Danny McCarthy misled the market over a whistleblower鈥檚 claim the listed company was rigging the quality of its coal to get better prices from its customers.
However, in clearing the men, Justice Jackman said ASIC 鈥渟hould have known鈥 that most of the charges 鈥渉ad no realistic chance of success, except perhaps in relation to some minor aspects鈥.
The regulator claimed that the quartet misled investors by approving public and ASX statements in early 2020 that said the listed Terracom had been 鈥渆xonerated鈥 of whistleblower Justin William鈥檚 allegations that quality certificates on thermal coal produced by the Blair Athol mine in Queensland had been manipulated.
ASIC also alleged the men failed to act with the requisite degree of care and diligence in the discharge of their duties as directors and officers of the company.
It said on Friday it would review Justice Jackman鈥檚 decision before deciding on an appeal.
Mr King was one of Australia鈥檚 highest-profile chief executives as head of Leighton Holdings, running the construction giant for 23 years before retiring in 2010.
ASIC鈥檚 case included the claim that he was obliged as a director to read a PwC report commissioned by Terracom鈥檚 lawyers Ashurst that found quality 鈥渋nconsistencies鈥 in 12 of 14 coal shipments tested.
Terracom鈥檚 testing partner, ALS, separately disclosed in February 2020 after Mr Williams鈥 claims that it found some quality certificates had been changed 鈥渨ithout justification鈥.
However, Justice Jackman rejected ASIC鈥檚 arguments about Mr King, saying 鈥渘one of the other directors or executives ever suggested to Mr King that the PwC report required consideration or raised concerns鈥.
鈥淥n 27 February 2020, Mr King attended a meeting with TerraCom鈥檚 auditors (EY), who then had a separate meeting with Ashurst for 1陆 hours for the purpose of going through the PwC report, before returning and confirming that EY had no issue with the PwC report and would provide a clean half-yearly report the following day, which is what occurred,鈥 Justice Jackman said.
He also described as 鈥渙ne of the more extraordinary features of ASIC鈥檚 case鈥 its contention that Mr McCarthy and Mr Boom should themselves have investigated Mr Williams鈥 allegations, 鈥渄espite the fact that Mr McCarthy and Mr Boom were the subject of the allegations made by Mr Williams which were investigated by PwC鈥.
鈥淭hey were plainly in a position of conflict, with a real and sensible personal interest in the investigation or inquiries,鈥 he said.
鈥淭he position taken by ASIC is plainly untenable.鈥
A separate ASIC whistleblower victimisation case against Terracom is still in court.