Court Date for James Hardie
The 2001 relocation of James Hardie Industries, formerly the largest manufacturer of asbestos products in Australia, to the Netherlands angered asbestos victims, incensed trade unionists and outraged members of the public; following an enquiry by the Government of New South Wales (NSW), lawsuits were threatened.1 Seven years on, the threats have been realized; on September 29, 2008, a civil hearing will commence before Justice Gzell in the NSW Supreme Court (Sydney) over charges brought by the corporations regulator against seven former directors and three former officers of James Hardie and its subsidiaries.
Although the Australian Securities & Investments Commission (ASIC) is seeking fines of up to A$200,000 for each infringement of corporation law, it has abandoned plans to bring an indemnity claim of up to A$1.9 billion to ensure the company meets its asbestos-related liabilities.2 Criminal proceedings for alleged breaches of the Corporations Act have also been dropped.3 In July 2007, criminal briefs in respect of certain individuals were referred by the ASIC to the Commonwealth Director of Public Prosecutions; the DPP decided that there was insufficient evidence to prosecute.
The ASIC alleges that certain James Hardie executives did not act appropriately when making statements about company arrangements to meet asbestos-related liabilities; there was a A$1.5+ billion shortfall in the Australian trust fund set up to compensate victims. Among other things, says the ASIC the Court will be asked to consider whether these former directors and officers failed to discharge their duties with due care and diligence. The defendants in the upcoming proceedings include the entire James Hardie Board of 2001 and two other executives of whom Philip Morely, chief financial officer of James Hardie Industries Ltd. (now known as ABN 60 Pty Ltd.), is one.4 James Hardie intends to fight the claims arising from the actions and statements allegedly made by its employees in 2001-2002.
According to an article from the Sydney Morning Herald, the ASIC will seek to have all 10 defendants disqualified from managing corporations.5 An ASIC spokesperson believes that:
The proceedings should bring into sharp focus the fundamental responsibilities of both executive officers and non-executive directors who are ultimately responsible for significant public company decisions and the release of information concerning those decisions to the share market, to employees (including former employees), creditors and the public. ASIC believes this action goes to the heart of the responsibilities of directors of public companies.
September 12, 2008
1 Kazan-Allen L. James Hardie: On The Run Again? April 23, 2008.
Kazan-Allen L. Prosecution of James Hardie. February 23, 2007.
2 This was considered unnecessary because funding arrangements had been finalized with the company which entailed a $3.4 billion 40-year asbestos compensation scheme. This deal had an added bonus of shielding company officers from individual lawsuits.
3 Lannin S. James Hardie Executives to Face Civil Proceedings: ASIC. September 5, 2008.
4 Defendants include Peter Macdonald, James Hardie's former Chief Executive, Peter Shafron, former General Counsel, Philip Morley, Former Chief Financial Officer, Meredith Hellicar, former Chairman, and former Directors Michael Brown, Michael Gillfillan, Peter Willcox, Martin Koffel, Greg Terry and Dan O'Brien, all of whom have denied the claims
5 Sexton E. Dismay at Decision not to Pursue Criminal Charges. September 6, 2008.