THE corporate regulator has suffered a third humiliating defeat, with the Federal Court yesterday dismissing its case against mining company Fortescue Metals Group and its chief executive, Andrew Forrest.

The Australian Securities & Investments Commission was heavily criticised by Federal Court judge John Gilmour, who said the corporate watchdog did not have the proof to back up its serious allegations that Mr Forrest was deliberately dishonest and misled the market in relation to 2004 market releases outlining deals made with several Chinese companies about a planned railway in the Pilbara, The Australian reported.

"It is important that allegations of dishonesty should be made only where there is a reasonable evidentiary basis for them," Justice Gilmour said.

"It is my opinion that, on the totality of the evidence available to ASIC, there was no such basis in this case."

Fortescue had faced a $6.6 million fine, and Mr Forrest a $4.4m penalty and the prospect of being banned from being a company director.

Mr Forrest was briefly Australia's richest person when his stake in Fortescue reached a value of $9.41 billion in May last year.

ASIC's Fortescue loss follows the corporate regulator's defeat in last month's $92m One.Tel case involving One.Tel founder Jodee Rich, and the rejection of its high-profile case against Andrew Lindberg, the former managing director of the Australian Wheat Board.

ASIC is looking at a $16m legal bill in the One.Tel case, although it recently announced it would appeal against the decision.

ASIC will again be forced to pay legal costs following yesterday's court decision.

The legal bill for Fortescue and Mr Forrest will be several million dollars.

This is in addition to ASIC's own legal costs, and also those of external law firm Mallesons, the firm to which it outsourced the Fortescue litigation.

A Fortescue spokesman said yesterday "justice has had its day", but Mr Forrest's barrister, Allan Myers QC, was more descriptive during the hearings when he described ASIC's case as "like a big souffle".

"There's a little bit of egg white and a little bit of batter and it's all whipped up with a lot of hot air to make it bigger than it is," Mr Myers said. 

For full story, see The Australian.