Chinese duped Fortescue, court told

Fortescue Metals Group boss Andrew Forrest and his executives did not mislead investors by overstating agreements with Chinese parties, a Western Australian court has been told.

The Australian Securities and Investments Commission alleges the Pilbara iron ore miner made misleading and deceptive statements about the nature of deals with three state-owned Chinese companies in 2004.

The case is the first of its kind, with ASIC seeking millions of dollars in fines against FMG and Mr Forrest, and that he is banned from directorship.

On the second day of a five-week hearing, FMG's lawyer John Karkar QC told the court that the company had expected framework agreements would be converted into binding deals or memorandums of understanding.

However, talks collapsed after the Chinese entities demanded to take over FMG with an 80 per cent stake, the court heard.