The recent unanimous judgment of the Full Federal Court in
Australian Securities and Investments Commission v Narain
 FCAFC 120:
Highlights the importance of ensuring public statements are not
misleading or deceptive.
Provides guidance where company officers may be held personally
liable for misleading statements by the company.
ASIC commenced civil action against the managing director of
Citrofresh International Ltd (Citrofresh), arising from an
announcement by Citrofresh to ASX. The managing director had
authorised the company secretary to release the announcement to the
The action was instigated under section 1041H(1) of the
Corporations Act, which provides that a person must not engage in
conduct, in relation to a financial product [in this case, shares]
or financial service, that is misleading or deceptive or is likely
to mislead or deceive.
In overturning the previous decision by a single judge based on
a narrow interpretation of the term 'in relation to', the
Full Court construed that term widely by holding that an indirect
or less than substantial connection between the conduct and the
financial product or service is sufficient and does not require any
direct relationship to the product or service.
The Court also held that the managing director was personally
liable for breaching section 1041H as he authorised the release of
the statement to ASX.
The action was remitted to the primary judge to determine on the
particular facts whether the announcement was misleading and
whether by authorising the release the managing director breached
his statutory director's duties.
The case illustrates that:
Listed companies should have clear protocols to ensure that
releases to ASX are accurate and complete, as liability under
section 1041H may arise from a statement without direct reference
in the statement to the company's securities. This principle
should also be borne in mind for all public announcements made by a
company, including on its website, that could be considered to have
any connection to the company's securities.
Any person may be personally liable under section 1041H if they
are the authorised person who, with knowledge of the
statement's contents, prepares, instructs or authorises release
of a misleading or deceptive statement.
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This publication is intended as a first point of reference
and should not be relied on as a substitute for professional
advice. Specialist legal advice should always be sought in relation
to any particular circumstances and no liability will be accepted
for any losses incurred by those relying solely on this
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