[LINK] Hardies decision ...

[Frank O'Connor]

See http://www.theage.com.au/business/hardie-directors-breached-duties-high-court-20120503-1y0cu.html

The High Court has held that seven directors of the building group James Hardie Industries breached their duties by approving the company’s release of a misleading statement to the stock exchange.

It also held that company secretary and general counsel Peter James Saffron failed to discharge his duties with care and diligence, in relation to the actuarial work that underpinned the statement in which James Hardie said a compensation fund for asbestos disease victims was ‘‘fully funded’’.

Today’s High Court judgment is regarded as a major milestone in determining directors duties, and the disclosure regime.

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It is 11 years since James Hardie shunted its asbestos liabilities into a special foundation, and in a statement to the stock exchange claimed that the foundation was ‘‘fully funded’’ to meet future compensation claims.

‘‘Fully funded’’ it was not, and within three years the fund was running out of money. Public sentiment turned on what was seen as an act of corporate bastardry.

James Hardie had relocated to the Netherlands, leaving a rapidly emptying pot for the victims of asbestos disease. The foundation was finally found to have been underfunded by about $1.5 billion.

Much of the public outrage centred on the directors, and executives of the company - and now the HIgh Court has delivered the highest legal instalment in a decade long saga concerning directors duties.

The Australian Securities and Investment Commission launched a civil case against seven James Hardie directors, and other officers, in 2007.

In 2009, Justice Ian Gzell of the NSW Supreme Court found James Hardie’s chairman from 2004 to 2007, Meredith Hellicar, and former non-executive directors Michael Brown, Michael Gillfillan, Martin Koffel, Dan O’Brien, Greg Terry, and Peter Willcox, had breached their duties in approving a misleading public statement. They were banned from acting as company directors for five years, and fined $30,000 each.

Former James Hardie chief executive, Peter Macdonald, was banned for 15 years and fined $350,000 for his role in forming the foundation and publicising it.

That judgment was appealed by the directors, and in December 2010 three NSW appeal court judges overturned the decision, saying that the corporate regulator had failed to prove the directors passed a resolution at a board meeting approving the statement to the stock exchange. The directors were free to return to boardrooms.

Following todays High Court decisoin, the case will be remitted to the NSW Court of Appeal for issues of ‘‘claims to be excused’’ from liability, penalty and disqualificatoin.

llamont at smh.com.au


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